Dáil Éireann Debate, Wednesday - 13 October 2021
112. Deputy Róisín Shortall asked the Minister for Finance if he will provide the Department calculations by that reportedly project a revenue loss of €2 billion a year following a corporate tax rate increase to 15% (details supplied); and if he will make a statement on the matter. [50076/21]
View answerThe Deputy will be aware that I have consistently indicated that there would likely be a significant cost to the Exchequer arising from an agreement reached at the G20/OECD Inclusive Framework on BEPS.
Firstly, it should be stressed that there are two pillars to this agreement. Pillar One will see a reallocation of a proportion of profits to the jurisdiction of the consumer. This means that, in effect, corporate tax revenue streams which now flow to the Irish Exchequer will flow to the Exchequers of other countries when implemented. Pillar Two will see the adoption of a new global minimum effective tax rate of 15% applying to multinationals with global revenues in excess of €750m.
While the final cost is very difficult to predict, my Department and the Revenue Commissioners have previously estimated that the cost of the agreement could be between €800m and €2 billion annually when both pillars come into effect. These figures are included in the Stability Programme Update and the Summer Economic Statement (SES). Given the uncertainty over the potential implementation of any agreement, this costing was phased in over a number of years, with the SES assuming a €1 billion impact in 2023, rising to €1.5 billion in 2024 and €2 billion in 2025.
There have been significant changes to the original proposals since then, both in relation to Pillar One, in which there is now a higher re-allocation than was originally foreseen, and on Pillar Two. However, it should be stressed that while there is now a broad high level agreement in place on the main features of a solution, discussions are continuing and will continue into 2022 on how the Agreement will be implemented in practice. For instance, the discussions on Pillar One will need to examine the rules in respect to reallocation from entities within a group. Further, it remains to be seen what additional tax will be paid by MNEs under Pillar Two when substance based carve-out rules are applied which can reduce the effective tax rate paid.
As technical discussions on the implementation framework continue, officials from my Department and from Revenue will keep the position under review and, when and if necessary, my Department will provide an update on how the agreement is expected to impact the public finances.
