Minister for Finance, Paschal Donohoe T.D., discussed why joining the OECD Inclusive Framework agreement on international tax reform was in Ireland’s best interest, when speaking to the Committee on Finance, Public Expenditure and Reform and the Taoiseach last month.

The two-pillar agreement which Ireland joined last month, provides for the reallocation of a proportion of profits to the jurisdiction of the consumer under Pillar One and for the adoption of a global minimum effective tax rate of 15 percent applying to multinational companies with global revenues in excess of €750 million under Pillar Two.

The Minister detailed why joining the agreement is in Ireland’s best interest:

“First, Ireland is one of the most highly globalised countries in the world. We have clearly benefitted from the investment and good jobs that have accompanied the decision of many multi-nationals to make Ireland their home. It is vital that we adapt and evolve in line with new international rules so that we can continue to be a world class destination for inward investment.

“Second, while the agreement introduces a global minimum effective tax rate of 15% for companies which have a turnover greater than €750 million, my intervention was instrumental in ensuring that the rate is moderate, and will continue to permit tax competition within guardrails, recognising that other countries advocated for higher rates. Additionally removing a proposal for “at least” helps deliver the predictability that is a cornerstone of Ireland’s offering.

“Third, we will retain the 12.5% corporation tax rate for the 95% of companies in Ireland that are out of scope of the agreement - discussions with the European Commission confirmed that a forthcoming Directive on Pillar Two will be faithful to the agreement. Further, we can continue to allow our tax system to support innovation and growth, including through the use of R&D tax credits.”

The Minister also discussed that if Ireland was outside of the agreement, its design of the global minimum tax is such that other jurisdictions could apply a top-up to the subsidiary of an in scope multinational group where it is taxed below the 15 percent rate.

The Minister firmly concluded that he believes that the upsides of being in the agreement far outweigh the downsides, and he confirmed his confidence in Ireland remaining competitive in attracting overseas investment.