The Irish and Estonian governments agreed on Thursday to sign a 15% global minimum tax rate on multinationals, leaving only Hungary as the final moratorium against the far-reaching deal.
The reform aims to prevent international corporations from cutting tax bills by registering in countries with lower rates.
Irish Finance Minister Pascal Donohoe said: “The government has now approved my recommendation that Ireland join the international consensus.”
“I am fully satisfied that our interests are better served within the agreement,” he said.
Estonian Prime Minister Kaja Kailas said that by joining the reform “we will have the best chance of ensuring that Estonia’s business environment and tax policy continue to work in the interest of a better future for all of us.”
In June, finance ministers of wealthy G-7 countries endorsed a global minimum corporate tax rate of at least 15%, reached within the framework of the Organization for Economic Co-operation and Development (OECD).
It was ratified by the G-20 in July and has been signed by over 130 countries except Hungary.
Hungarian Foreign Minister Peter Sizzarto said earlier this week that there is a chance his country could agree to it as long as the reform “does not harm the Hungarian economy or put Hungarian jobs at risk. ”
Donohoe said Ireland insisted on a change in wording, except “at least” before the 15% figure, describing it as a significant issue that needs to be resolved, “the high rate of some because of the desire to seek”.
The minister said the reforms were expected to take effect in 2023.
Ireland currently has a 12.5% tax rate.
Its tax policy has attracted giants such as Apple and Google, while Estonia was concerned that joining the reform could threaten its vibrant tech start-up sector.
The reform will affect 56 Irish multinationals that employ approximately 100,000 workers, as well as 1,500 foreign-owned multinationals employing 400,000 people.
This only applies to companies whose annual turnover exceeds 750 million euros ($870 million). Small businesses will still pay corporate tax at 12.5%.
Kailas said reforms in Estonia’s case “won’t change anything for most Estonian business operators, and will only pertain to subsidiaries of large multinational conglomerates.”
While Ireland loses 800 million to 2 billion euros in corporate tax receipts if companies leave the country, the minister argued that if it does not sign the deal, Ireland will “lose influence with respect to important decisions”. “The coming months.”
He said there was debate in the US Congress over changes that would align their tax system with the OECD agreement, calling it a key factor due to “significant investments by US multinationals here”.
Following the Ireland and Estonia decisions, US Treasury Secretary Janet Yellen said, “We are on the way to a generational achievement of creating a global minimum tax, which will create a more level playing field so that employment and investment in the United States can increase.” ”
Ireland’s low levy has attracted a large number of pharma and tech firms, but it has also led to allegations that the country serves as a tax haven.