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Exchequer Returns

Dáil Éireann Debate, Thursday - 16 December 2021

Thursday, 16 December 2021

Questions (160)

Gerald Nash

Question:

160. Deputy Ged Nash asked the Minister for Finance his views on the recent comments by a person (details supplied) with regard to the potential for increased revenue to the Exchequer due to the planned increase in the minimum corporation tax rate from 12.5% to 15%; his plans to undertake an updated analysis on the impacts of a new minimum rate of 15%; and if he will make a statement on the matter. [62145/21]

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Written answers

It is important to recognise that Ireland’s corporation tax rate of 12.5 per cent will remain for the vast majority of Irish businesses. The threshold that will apply to the 15 per cent minimum effective tax rate is €750 million annual global turnover. Thus, the vast majority of companies in Ireland - over 95 per cent - will not be subject to these new rules, and will continue to be subject to corporation tax at a headline rate of 12.5 per cent.

My Department and the Revenue Commissioners previously estimated that the cost of the OECD agreement on a new tax framework to address the tax challenges of digitalisation could be up to €2 billion annually when both pillars come into effect. However, as I have stated many times, this is an extremely challenging exercise, both in terms of timing and magnitude. Although there are two pillars to this Agreement, it is important to understand that they are intended as integral parts of a single agreed solution. How they interact and the degree to which this interaction influences business behaviour is very difficult to predict.

At a superficial level, the application of a minimum tax rate of 15 per cent under Pillar Two could provide some uplift to domestic corporation tax revenues. However, this would be a static assumption which does not take account of how firms react to a new tax regime, or to potential changes in tax regimes in other jurisdictions i.e. changes to the tax base. Further, any uplift on Pillar Two would be countered by the potential cost of Pillar One. That cost remains highly uncertain as its technical implementation is still far from resolved.

It should also be stressed that what we have now is a broad high level agreement on the main features of a solution. Discussions are continuing and will continue into 2022 on how the agreement will be implemented in practice. 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.

Question No. 161 answered with Question No. 127.
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