Ireland’s response to global tax reform

The Irish Government has signed up to OECD proposals for a global minimum effective tax rate of 15 percent for multinationals with global revenues in excess of €750 million. Ireland has negotiated an effective minimum rate set at 15 percent instead of the original “at least” 15 percent proposal by the OECD and endorsed by the G7 in July this year.  Ireland has also secured agreement that the 12.5 percent rate continues to apply to companies below the €750 million revenue threshold.  Speaking on the announcement, Minister for Finance, Paschal Donohoe said “We have secured the removal of ‘at least’ in the text.  This will provide the critical certainty for Government and industry and will provide the long-term stability and certainty to business in the context of investment decisions”.  The Department of Finance says the new rules are expected to come into play as early as 2023. The minimum effective 15 percent rate will apply to 56 Irish multinationals employing approximately 100,000 people, and 1,500 foreign owned MNEs based in Ireland employing approximately 400,000 people.  In a press release, Minister Donohoe indicated that he expected Ireland to continue to remain a very attractive location for FDI long after the OECD agreement is implemented, The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (IF) agreed a two-pillar solution to address the tax challenges arising from the digitalisation of the economy in July. The Inclusive Framework must now agree an implementation plan for the proposed two-pillar solution. 

The Department of Finance launched a public consultation on the OECD’s international tax proposals. Chartered Accountants Ireland under the auspices of the CCAB-I will respond to the consultation. We will reflect the unique professional experience of accountants on the issues raised in this important consultation.  With that in mind we invite members to respond to this survey before 16 August.  The Department of Finance notes that the consultation will be helpful in identifying the challenges and opportunities of the proposals in respect of Ireland’s corporate tax code and broader industrial policy.   On launching the consultation, Minister Donohoe said: ‘I believe it is in the interest of all concerned to achieve an equitable, ambitious and sustainable agreement at the OECD on the international tax architecture. It is essential as we emerge from the Covid-19 pandemic that the international tax system provides the necessary certainty and stability to support growth and investment, and Ireland is committed to playing our part in reaching the comprehensive agreement’. “I am committed to ensuring that Ireland’s tax policy continues to support economic growth and prosperity, and in this respect I would welcome the views of the public and key stakeholders on the key aspects of the OECD proposals” The consultation period runs from 20 July to 10 September.  For more details see the Department of Finance’s website. 

The OECD Inclusive Framework reached agreement on Pillar One and Pillar Two proposals last Thursday, but Ireland is one of nine members to not sign the agreement.  Ireland supports Pillar One proposals but will not sign up to a global minimum effective tax rate of ‘at least 15%’. Minister Donohoe said: ‘I have consistently spoken of my desire for a comprehensive, sustainable and equitable agreement on the international tax rules at the OECD that meet the needs of all countries, large and small, developed and developing. I was not in a position to join the consensus on the agreement and specifically a global minimum effective tax rate of ‘at least 15%’ today. I have expressed Ireland’s reservation, but remain committed to the process and aim to find an outcome that Ireland can yet support. Ireland will continue to play our part in reaching a comprehensive and, indeed, historic agreement’. A press release from the Department of Finance noted that Ireland will constructively engage with OECD Inclusive Framework in discussions and technical work over the coming months as part of the process to reach a comprehensive agreement is in October. Minister Donohoe was interviewed on Newstalk Breakfast, where he noted that he wanted to continue in the negotiation process, but that the global minimum effective tax rate was “a matter of huge national sensitivity to Ireland”.