Paschal Donohoe vows to ‘scrutinise’ new global tax legislation

The OECD deal will ensure big companies pay a minimum rate of 15%.
Paschal Donohoe vows to ‘scrutinise’ new global tax legislation

By Cate McCurry, PA

The Minister for Finance said he will “scrutinise carefully” the legislation that will bring in a new global deal on tax when it is published next month.

Paschal Donohoe said the implementation of the change in corporate tax rate through an EU directive will prevent other member states from “undercutting” Ireland.

Last month Ireland agreed to join the OECD framework for a global rate of 15 per cent tax, giving up its highly-prized previous rate of 12.5 per cent.

The OECD deal will ensure big companies pay a minimum rate of 15 per cent.

Budget 2022
Minister for Finance Paschal Donohoe said the implementation of the change in corporate tax rate through an EU directive will prevent other member states from “undercutting” Ireland. (Brian Lawless/PA) 

Mr Donohoe told the Oireachtas committee on finance that the decision to sign up to the change was a “significant moment”.

He said the benefit of the EU directive will see it consistently applied across member states.

“I am confident no one will undercut us, and it will be faithfully implemented through the directive which has the benefit of managing that concern,” Mr Donohoe added.

“We will scrutinise it carefully and expect it to be published in December.”

Mr Donohoe said the new rate will allow Ireland to continue to be competitive and an “attractive” place to invest.

 

The Government has previously estimated that corporate tax revenue will be €2 billion lower as a result of the international tax deal.

The agreement will introduce two distinct pillars to be implemented.

Pillar one will see a reallocation of a proportion of profits to the jurisdiction of the consumer.

Pillar two will see the adoption of a new global minimum effective tax rate applying to multi-nationals with global revenues in excess of €750 million.

Mr Donohoe said he anticipates around 100 global companies will be subject to the new tax agreement.

The Minister for Finance was pressed by Sinn Féin TD Pearse Doherty for an updated estimate on the predicted loss of tax revenue.

Mr Donohoe said his department is not able to provide a revised figure until more detail is provided by the OECD.

He added: “I have long signalled that there will be a cost to Ireland signing up to this agreement.

“My department and Revenue have estimated that the cost in terms of tax receipts foregone could be up to €2 billion in the medium term, this costing will be kept under review as the critical technical discussions proceed.

“It is important however to consider the very real risks associated with staying outside the process.

“As a small open economy within the EU, we have strong ties to the US and many of the other G20 countries.

“This makes it essential that we stay in line with key international accords.

“Further, if Ireland was not in the agreement we would lose influence in respect to the critical and ongoing technical discussions.”

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