Thursday, October 21, 2021

Ireland agrees to global tax deal

By Padraic Halpin and Conor Humphries | Reuters

DUBLIN – Ireland on Thursday abandoned protests over changes to global corporate tax rules, agreeing to drop its prized 12.5% ​​tax for large multinationals in efforts to enforce a worldwide minimum rate.

Ireland, the low-tax European headquarters for blue chip companies including Apple, Google and Facebook, refused to sign an initial deal in July, objecting to a proposed rate of “at least” 15%.

An updated text dropped “at least” this week, clearing the way for ministers to do what subsequent governments have said they would never consider – dropping the low rate that has stymied Ireland’s investment for decades. and helped to win jobs.

“Joining this agreement is an important decision for the next phase of Ireland’s industrial policy – a decision that will ensure Ireland is part of the solution,” Finance Minister Pascal Donohoe said at a news conference.

“It’s a difficult and complicated decision but I believe it’s the right one.”

A handful of countries barged into the July deal brokered by the Organization for Economic Co-operation and Development (OECD), which marked the first rewrite of international tax rules in a generation.

The holdouts, which include fellow EU members Estonia and Hungary, cannot block the proposed changes. The 140 negotiating countries are to meet on Friday to finalize the agreement.

The US Treasury, which had pressured Ireland to support a global minimum tax, lauded Dublin’s decision to lead the world towards a “generational achievement” to ensure its fairness of corporation taxes. to pay the share.

If Ireland maintains its low rate, multinationals that book profits there may be forced to pay additional tax elsewhere under the proposals.

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The government said it had received assurances from the European Commission that Ireland could maintain a 12.5% ​​rate for firms with annual turnover of less than 750 million euros ($867 million) and tax incentives for research and development. Is.

Donohoe said the commission also promised that it would faithfully stick to the OECD agreement and would not demand higher rates among member states.

“no significant effect”

While Ireland wrestled with possible changes for months, this would not be the first change to its tax system.

The 10% tax rate convinced Apple to set up a manufacturing facility in the 1980s, following Microsoft and Intel.

The government raised this to 12.5% ​​in 1997 to comply with EU state aid rules and increase multinational jobs.

The 12.5% ​​rate was fiercely defended in the intervening years, particularly when Ireland came under pressure to raise it as part of the 2010 international bailout.

Many analysts expect Ireland to remain competitive in the fight to attract foreign direct investment.

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