Monday, January 24

Ireland ends 12.5% ​​tax rate in OECD global compact | Ireland

Ireland has abandoned its cornerstone of low tax policy of the past 18 years, which helped persuade some of the world’s largest companies, including Google and Facebook, to locate their European headquarters in Dublin.

The decision comes after months of disputes over the fine print of an agreement by the Organization for Economic Cooperation and Development (OECD) to operate with a minimum tax rate of 15% in more than 130 countries.

Ireland was initially one of nine countries that refused to join the plan, but on Thursday afternoon its cabinet signed a deal before a broader announcement from the OECD was expected at 6pm on Friday.

It ends the country’s tax rate of 12.5% ​​that has been applied since January 1, 2003, which has frustrated critics in other EU countries and the UK, where corporate tax rates have been applied. higher.

However, sources close to the Irish government said they were not concerned about the flight of multinationals, as the biggest blow to their low-tax regime came in 2015 when, under pressure from the EU, tax evasion schemes were implemented. taxes known as the “double Irish”. outlaw.

Under this scheme, multinationals paid just 1-2% tax on their income, a fraction of the general tax rate of 12.5% ​​in Ireland and 35% in the US.

The new deals, which will be limited to companies making more than 750 million euros a year worldwide, will take effect in 2023 and cost the Irish treasury between 800 and 2 billion euros a year, according to government estimates.

The Irish government said the deal would be “golden”, with assurances requested and received from the EU that it will not seek to increase the tax rate later on.

The government said 56 Irish multinationals employing 100,000 people and 1,500 foreign multinationals employing 400,000 would be affected.

“This is the right decision,” said Finance Minister Paschal Donohoe. “I am absolutely convinced that our interests are best served within the agreement.”

Donohoe confirmed that Dublin had managed to get the phrase “at least” out of a July draft compromise for a tax of “at least 15%”, raising concerns about further rate hikes being expected.

He also confirmed that the European Commission directive implementing the OECD agreement “will be faithful to that agreement and will not go beyond that consensus” and that Ireland could continue to apply a 12.5% ​​tax rate to companies that generate less than 750 million euros a year worldwide. .

Donohoe said Ireland needed to continue to provide “predictability” to businesses and, had it not registered, it would have lost “influence over critical decisions to be made in the coming months.”

Ireland attracted some 1,000 multinationals from the tech, financial and pharmaceutical sectors thanks to its corporate tax policy, including Pfizer, Intel, Yahoo, LinkedIn, TikTok, Apple, IBM and Twitter.

Such is the importance of these multinationals to the Irish economy that figures from Irish Revenue Commissioners released in May showed that just 100 companies accounted for almost 80% of tax revenue.

The figures excluded sectors closed due to the lockdown, including hospitality and travel, but showed Ireland’s dependence on multinationals for employment and income tax.

Approximately 32% of all jobs in the Republic of Ireland in 2020 were in multinationals, and those employees contributed 49% of all employment taxes, compared to 27% and 44%, respectively, in 2019.

Ireland’s decision to adhere to the OECD rate marks the end of years of pressure from the EU and the UK for the low tax rate.

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