Taoiseach Micheál Martin has given strong indications that Ireland will sign up to join the OECD agreement on a minimum corporate tax rate of 15 per cent.
Minister for Finance Paschal Donohoe looks set to ask Cabinet colleagues today to give clearance for Ireland to sign up to the revised draft of the OECD agreement. This would mean the end of Ireland's 12.5 per cent tax rate and its replacement with a rate of 15 per cent.
A key part of Mr Donohoe's message is likely to be the Government's intention to seek the retention of the existing 12.5 per cent for companies with an annual turnover smaller than the €750 million specified in the OECD draft agreement. However, further negotiations on the detail of this are likely to be needed with the European Commission.
Ireland has received assurances from a number of senior European Commission figures that it will not try to amend the OECD rules when they are transposed into EU law.
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A key reason why Ireland had objected to the phrasing in the draft OECD deal of “at least 15 per cent” for the minimum rate was that it feared this would open the way for pressure to adopt a higher rate across the EU.
Sources say that Ireland has been assured the commission will not try to “gold-plate” any OECD deal and will just seek to reflect it directly in EU law.
Speaking at an EU leaders' summit in Slovenia on Wednesday, Mr Martin said he did not want to pre-empt the Cabinet decision, but that changes to the text of the agreement had improved the situation.
“We were very anxious and we did enter reservations when the consensus was agreed some time ago. We indicated that we felt that the language, particularly around ‘at least’, was not acceptable to us – we made that clear to other leaders.
“That language has been removed. That does improve the situation significantly from our perspective. Its application also is to a small number of companies that are above a significant threshold of turnover and value. So the vast majority of companies will not be impacted by the higher rate.”
Multinational tax
Earlier Department of Finance estimates were that the part of the deal which involves multinationals paying more tax in major markets could cost Ireland €2 billion a year or possibly more. The exact figure will depend on final negotiations at the OECD on the sensitive area of reallocating profits.
However, the increase in the rate charged on major multinationals could raise significant funds for the exchequer and while the amounts are hard to forecast before details of the deal are known, this could make up for a significant portion of the cash lost on the other side of the deal. The key question will be the impact on future investment flows of the new regime in the years ahead.
