Bernard Durkan
Question:276. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which corporation tax changes are likely to impact on this country’s future; and if he will make a statement on the matter. [54727/21]
View answerTuesday, 9 November 2021
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On 8 October, Ireland was among 136 jurisdictions who joined a two pillar international agreement in October to reform the international tax rules to address the challenges of digitalisation. Pillar One of the agreement will see a reallocation of a proportion of profits to the jurisdiction of the consumer, while 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. The agreement on Pillar Two allows for the retention of our domestic 12.5% corporation tax rate for the 99% of the companies in Ireland that are out of scope of the agreement.
Joining this agreement is an important decision for the next stage of Ireland’s industrial policy - a decision that will ensure that Ireland is part of the solution in respect to the future international tax framework. It is a sensible and pragmatic decision made by Government in Ireland’s interests and ultimately a decision which will provide the conditions to provide long term certainty for business and investors to the benefit of the many thousands of employees across Ireland.
In making a recommendation to Government that Ireland will join this international agreement, it was important to consider the alternative of staying outside the process:
First, it must be recalled that Ireland is a small open economy which is highly connected including with our fellow EU Member States, the United States, and many of the members of the G20 such as the UK, China, Japan, and Australia. These relationships are important for our business, for trade, and society more broadly, and thus it is essential that Ireland continues to stay in line with key international accords particularly one that has the support of 136 jurisdictions including the EU27 and the members of the G20.
Second, if Ireland is not in the agreement we will lose influence in respect to the critical discussions which will take place in the coming months on the implementation rules.
Third, failure to sign up to an agreement will lead to continued uncertainty for businesses operating in Ireland.
Finally and critically, it should be stressed that the design of the global minimum tax means that a country can apply a top-up tax to the subsidiary of a multi-national enterprise which has been taxed below the minimum effective rate. If Ireland is not to apply the global minimum effective tax rate it means that another jurisdiction will collect those taxes. So, not joining an agreement will result not just in reputational risks, but also economic and fiscal risks.
This has been a difficult and complex decision but I believe it is the right one, and I am confident that Ireland will remain competitive into the future, and we will continue to be an attractive location when multi-nationals look to investment locations.