Ireland’s response to global tax reform news

The Department of Enterprise, Trade and Employment has launched a consultation on the EU Directive on public country-by-country reporting. The Directive requires MNEs whether they are headquartered in the EU or not, with a base, subsidiary or a branch in the EU, and revenue over €750 million, to disclose publicly the tax they pay. For the first time, European and non-European MNEs doing business through their subsidiaries and branches in the EU will be required to publish information on where profits are made, and taxes are paid across the EU and third countries. The Directive must be transposed into national law by June 2023. The Department of Enterprise, Trade and Employment is consulting on the use of two Member State policy options, being matters in respect of which Member States can or must make a choice. Respondents are requested to make submissions using the Response Template, clearly marked as ‘response to Public Consultation on the Transposition of Directive (EU) 2021/2101’ to companylawconsultation@enterprise.gov.ie. The deadline for The Department of Enterprise, Trade and Employment submissions is 5pm on Friday, 18 February 2022.  For full details see the Department of Enterprise, Trade and Employment’s website.  

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”.  

Minister for Finance, Paschal Donohoe, spoke to Morning Ireland last Friday and noted that all is still to play for as other small open economies express tax sovereignty concerns on the political agreement reached by the G7 on a 15 percent global minimum corporation tax rate.  Minister Donohoe says he is confident Ireland will continue to be an attractive location for FDI and will continue to compete with its 12.5 percent cornerstone corporation tax rate.  The Minister also noted that Facebook’s recent announcement that staff can work remotely overseas does not have any impact on Ireland’s tax residency rules for individuals and corporates.  The Minister went on to say that he is considering information and data on a possible vacant site tax but noted that the information to inform that decision will not be ready in time for Budget 2022.  For the full interview listen here to Morning Ireland. 

The plot thickens frequently in the leadup to the finalisation of the OECDs BEPS 2.0 project due to be presented to the G20 in July.  In April, the US announced its support for a global corporate tax rate while the European Commission launched its corporate tax policy proposals earlier this month. Cormac Kelleher, Norah Collender and Dr Brian Keegan discuss what all this could mean for Ireland.

Chartered Accountants Ireland under the auspices of the CCAB-I responded to the Department of Finance’s public consultation on Ireland’s tax treaty policy.  The updated Corporation Tax Roadmap 2021, published earlier this year, committed to review Ireland’s tax treaty policy, taking account of international developments, and publish a tax treaty policy statement by the end of 2021. The consultation sought views on the economic considerations for Irish tax treaty policy and the role of treaty policy in supporting developing economies.  The CCAB-I made the following recommendations and observations: Ireland’s tax treaty policy needs to consider the implications of remote working abroad with reference to articles on employments and permanent establishment, and their appropriateness for extensive remote working abroad. A broadening of the Irish tax treaty network may facilitate operations currently located in the United Kingdom seeking to maintain a presence in the European Union. Ireland’s tax treaty policy should look to better serve the aircraft leasing and financial services sector by focusing on supporting trade with Asian, African, and South American countries. Ireland’s tax treaty priorities in the context of international tax reform should seek to ensure dispute resolution mechanisms are supported, enhanced, and reformed where appropriate. Ireland should seek to renegotiate its double tax treaty with Japan, with a view to achieving terms like other European nations. Actions and supports outside of treaty policies are a more effective means of assisting developing countries. Ireland can support developing countries by participating in initiatives like Tax Inspectors Without Boarders. The practice of negotiating with developing countries should continue to be based on the provisions of both the UN and OECD model conventions. For full details see the CCAB-I’s Irish tax treaty policy submission. 

A seminar on international taxation, hosted by the Department of Finance, took place last Wednesday, 21 April. Minister for Finance, Paschal Donohoe TD, in his opening address discussed Ireland’s commitment to reaching an agreement on the OECD Inclusive Framework’s latest iteration of the BEPS project while also emphasising Ireland’s commitment to the Irish 12.5 percent corporate tax rate.  Minister Donohoe stated that international agreement on global tax reform must facilitate healthy and fair tax competition. The Minister said that the Irish corporation tax rate “can contribute to Exchequer revenues for investment in infrastructure and capacity, and one that can also stimulate investment, growth and innovation, which are core to Ireland’s industrial policy.” He described it as “a fair rate and within the ambit of healthy tax competition”. On reaching agreement on the OECD two-pillar solution to the tax challenges arising from digitalisation, the Minister said: “I believe that an agreement can be reached and I will work constructively towards such an agreement. But, I also believe that it is a legitimate objective that any agreement can facilitate healthy and fair tax competition, while meeting the needs of all, not just some of the participants. In stressing this point, we must recall that, today, we have far more robust international tax rules and safeguards to prevent abuse, arbitrage, base erosion and profit shifting than existed a decade ago. The BEPS project has gone a long way to providing these safeguards and we are willing to go that extra mile in strengthening them.” The Department of Finance press release includes a link to the Minister’s entire speech. You can view the recording of the seminar on gov.ie also.