Dáil Éireann Debate, Wednesday - 20 March 2024
274. Deputy Pearse Doherty asked the Minister for Finance if he has received from his Departmental officials or the Revenue Commissioners an estimate, range of estimates or data enabling an estimate of the Exchequer impact of Pillar 1 and Pillar 2, respectively and separately; if so, when such estimates were provided; the details of those estimates; and if he will make a statement on the matter. [13093/24]
Amharc ar fhreagraThe Department of Finance and the Revenue Commissioners are continually monitoring the potential economic impact of the OECD agreement as those negotiations continue and as the agreement continues to be implemented globally.
As you will be aware an initial estimate of the potential cost of implementation of both pillars of the OECD agreement in terms of reduced tax receipts was published in 2020 as being potentially in the region of €2 billion per annum - approximately 20% of CT revenue at that time.
Since 2020, while acknowledging that CT receipts have increased considerably over that time, it has not been possible to update this figure while so many aspects of the rules remain undecided and so the estimate used for budgetary purposes has remained at €2 billion.
For Pillar One, significant uncertainty remains in relation to the final design of certain elements of the rules which will have a bearing on the potential impact to the Exchequer. Officials from the Department of Finance and the Revenue Commissioners continue to engage constructively in negotiations on these matters at the OECD to ensure that Ireland’s best interests are protected and to ensure that the outcome of this work is faithful to the October 2021 agreement and represents a fair outcome to all jurisdictions. Pillar One will come at a cost as some taxing rights are allocated to market jurisdictions but as a small and open economy this is a price that is worth paying for the stability of the international tax framework.
Pillar Two of the OECD agreement will implement a minimum rate of tax globally. The EU Minimum Tax Directive has been transposed into Irish legislation via the Finance (No.2) Act 2023 with the first tax returns expected by mid-2026. Pillar two is anticipated to result in an increase in tax receipts however, as indicated above, overall there will be a net cost to Ireland from the agreement as a result of Pillar One.
It is important to note that any estimates produced in relation to the impact of agreement are subject to a significant level of uncertainty due to the lack of clarity around the final design of the rules, the interaction of both Pillars, data constraints and uncertainty regarding the response of MNE’s and jurisdictions application of the rules globally over the coming years.
That said, with the implementation of Pillar Two commencing this year and negotiations at the OECD on Pillar One progressing, my officials, together with those of the Revenue Commissioners are continuing work on assessing the long-term impact of the two Pillar solution with a view to updating the projected fiscal impact as part of the Stability Programme Update in April.
