Dáil Éireann Debate, Tuesday - 27 June 2023
209. Deputy Richard Boyd Barrett asked the Minister for Finance the full-year revenue that would be generated by increasing the corporate tax rate to 20% and 25%; and if he will make a statement on the matter. [30992/23]
View answerIreland’s corporate tax regime has been built on certainty and predictability, and the 12.5% corporation tax rate on trading income has been a cornerstone of that regime for over 20 years. This stability has enabled companies to plan long-term investments in Ireland, generating employment and increasing economic activity.
The Deputy will be aware that Ireland signed up to the OECD Two Pillar agreement in October 2021, including the agreement of a global minimum effective rate of 15%, on a jurisdictional basis, for in-scope entities. Work is ongoing with a view to introducing the necessary legislation in Finance Bill 2023, and the Deputy may be aware that a Feedback Statement containing draft approaches to key parts of the necessary legislation was published in March.
Ireland will continue to be able to offer a 12.5% rate for businesses out of scope of the agreement, i.e. businesses with revenues less than €750m. This means that over 95% of companies operating in Ireland are outside of the scope of the global minimum effective tax rate of 15% and they will continue to be taxed at the 12.5% rate.
On a straightforward, mathematical basis there would be a large theoretical yield from increasing the 12.5% trading rate of corporation tax to 20%. However, as has been demonstrated in research published by my Department and the ESRI, it is likely that such changes would lead to lower levels of economic activity and behavioural changes in the investment decisions of multinational companies. It is likely that this would result in lower employment in the multinational sector, leading to reductions in tax revenues across a number of tax heads. Therefore, it is not possible to accurately or robustly estimate the potential yield from an increase in the corporation tax rate as proposed by the Deputy.
