Cabinet set to decide on Ireland’s corporate tax rate
The Cabinet will meet this afternoon to decide whether Ireland should sign up to sweeping global corporation tax reforms that would require the long-standing 12.5% rate to be increased to 15%.
The plan also proposes changes to where companies would pay their taxes, that the Department of Finance has estimated could reduce Ireland’s tax take by €2 billion a year.
The draft reforms have been brokered by the OECD among 140 countries, as part of a widespread agenda to modernise global tax rules, make them fairer and reduce the use of aggressive tax planning by some large multinational companies.
The relatively low 12.5% tax rate has been a cornerstone in Ireland’s successful foreign direct investment offering for decades and has been fiercely defended by successive governments.
Ireland was one of just nine countries involved in the negotiations who did not sign up to the proposals last July.
While it accepted parts of the plan governing where companies should pay their tax, it objected to the reference to a global minimum tax rate of “at least 15%” being included in the plan, arguing it created uncertainty because the phrasing would mean the rate could be increased further at a later date.
Since then, the Government and officials have been involved in intense negotiations with other countries in a bid to have the draft changed.
Earlier this week, an updated version of the proposals was circulated to states, which had the words “at least” removed.
The removal of the stumbling block has paved the way for Ireland to join the accord, subject to a final decision by Cabinet later today.
However, the Government has also been seeking assurances from the EU that if it does sign up, the union will not seek to try to raise the minimum rate further in the coming years.
This would involve transposing the text of the OECD deal into EU law.
Negotiations have continued through the week on that and other outstanding issues related to the plan.
These include discussions around the level at which the minimum rate would apply, as well as the nature of possible exemptions or flexibility for certain areas like research spending.
The Government was due to receive a further update to the draft overnight, which will be brought to Government by the Minister for Finance later.
Tomorrow, representatives of all 140 states and territories, including Ireland, will then take part in an OECD meeting at which a final deal could be agreed.
Yesterday, the Taoiseach confirmed that there had been “significant progress” made and that the changes to the text had been positive for Ireland.
He said the text goes a long way towards meeting the objectives of certainty and continuity that the Government set, while also remaining competitive in terms of the offering to companies and investors.
Ireland has to be part of agreement – Doherty
The Sinn Féin finance spokesperson has said the party believes Ireland has to be part of the OECD agreement.
Pearse Doherty said that it has made it “very clear we have to be part of this agreement”.
He said this “still allows us to be competitive, but less competitive than where we were”, so there is a need to focus in on housing, childcare, investment in infrastructure and higher education “to allow us to be competitive into the future”.
Mr Doherty said that clarity is needed from the European Commission that Ireland is allowed to run a dual rate, to allow a rate of 12.5% be applied to smaller companies.
He said that the Government needs to focus on getting approval from the commission on state aid rules.