Failure to agree on a 15 per cent minimum corporate tax rate risks reigniting global trade wars, the finance minister has said.
Eschal Donohoe said there were “challenges” to finalize a deal that was agreed in principle by 137 countries, including Ireland, last October, but plagued by delays in the US and last-minute requests from Hungary. The EU was cast in doubt because of the objections. ,
“The absence of such an agreement and the absence of this agreement will bring us back to square zero,” Donohoe said at an event organized by the US Chamber of Commerce Ireland on Friday.
“Failure to implement and make progress where we are now actually increases the risk of trade disputes and will increase the challenges facing global tax policy.”
Hungary’s turn last month angered French Finance Minister Bruno Le Maire, who suggested this week that the EU should bypass Budapest’s veto.
He said Hungary was holding the EU “hostage” after the earlier agreement was agreed, and added that a deal would go ahead “with or without Hungarian’s consent”.
Unanimity is required in tax matters at the EU level, but a process known as “advanced cooperation” allows groups of countries to proceed alone.
Mr Le Maire said he was in talks with the EU on increasing cooperation, and had informed US Treasury Secretary Janet Yellen of his plans.
The European Commission said this week it was focused on reaching a unanimous agreement, while a spokesman for the US Treasury said the US was “optimistic” Hungary would sign up.
Mr Donohoe said he was “optimistic” the EU and US could agree on both elements of the tax deal – a 15 pc tax and the transfer of tax rights on large multinationals to other countries.
“I firmly believe that it is in our best interest to have this happen. The rest of the world is watching the process,” he said.
The 15 pc rate will affect around 1,600 multinationals in Ireland with revenues exceeding €750m per year. The second part of the deal will affect only the world’s 100 most profitable companies, with more than €20bn in revenue, and could cost Ireland up to €2bn in lost tax revenue, the Finance Department estimates.
US Chamber President Catherine Duffy said any effort to broaden the tax base “must be done in a way that does not harm our international competitiveness and our ability to attract and retain jobs and investment in innovation”. .
The majority of companies (79 pc) surveyed by the American Chamber expect to create new jobs in the next 12 months, while 74 pc said they hired last year.
About a third of companies said housing is the most important challenge for Ireland to expand their business.
Ms Duffy said Budget 2023 should be “sustainably funded” and include investments in affordable homes, childcare, healthcare, education, energy and cyber security.
Mr Donohoe said “practicality” would be needed before Budget Day, again warning that “there are limits to what any government can do to address the effects of global change that are now unfolding”.
His remarks came as Eurostat estimates Irish prices rose 9.6 pc in June, well above the eurozone average and the highest rate in nearly 40 years.
On inflation, Mr. Donohoe said, “it is higher and it is more stable than initially estimated.”
“We also recognize the risk that rising inflation begins to undermine the real impact of our spending on public services.”
While he said the government would “continue to do its best to help”, he warned that excess spending could run the risk of “adding further fuel to our inflationary challenges and accumulating public debt”.