Huge Irish interest as new global corporate tax draws closer
Hints on a new deal on global taxation and multinationals – with obvious implications for Ireland – could come as early as tomorrow and ahead of a deal that is increasingly likely to be reached next week.
The G7 group of the world’s largest economies and the Organization for Co-operation and Development (OECD) are holding meetings next week to reach agreement on setting a global floor, possibly set at 15%, for countries tax multinationals.
But a virtual meeting of the G7 countries tomorrow, which has global economic recovery from the Covid pandemic and climate change on its agenda, may also provide clues as to the form of an emerging deal.
Ireland has a lot of skin in the game, experts say, as much of the state’s regained prosperity over the past three decades is directly based on the hundreds of thousands of jobs created by multinationals here, and just as important, on the billions in corporate taxes big foreign companies, such as Apple, Pfizer and Google, pay the Irish Treasury.
Corporate tax revenue from the Public Treasury rose from just 4.6 billion euros in 2014 to 6.9 billion euros in 2015, and has since swelled to 11.8 billion euros to represent now a record 20% of all tax revenue collected by the state.
This has raised concerns about how the government has bet on the continued flow of corporate tax revenue to fuel its future spending programs.
The Irish Fiscal Advisory Council (IFAC) earlier this week, in a report that criticized the government for its budget planning, warned that a group of just 10 multinationals accounted for 56% of the € 11.8 billion raised l last year for corporate tax.
University College Cork economist Seamus Coffey, one of the country’s leading multinationals and tax experts, said Irish observers would examine how countries are willing to meet the global minimum rate.
Meetings in the next few days will focus on “politics and diplomacy” to reach agreement on the global tax overhaul, he said.
He said that a few months ago the United States was looking for a rate of 21% for its own minimum tax floor that it levies on its businesses – which could likely have significant effects on future tax flows. investment in Ireland – but seem to focus overall minimum rate of 15%.
“From our point of view, the US minimum tax rate, if it were 21%, would significantly erode the attractiveness of the Irish tax of 12.5%,” said Mr Coffey, if the US president Joe Biden wanted to get what he wanted.
France has long pushed for comprehensive reform and has often targeted Ireland above the 12.5% rate.
The meeting of G7 finance officials in London next week is expected to reach an agreement to urge the rest of the world to change the amount of taxes paid by multinationals and where they live, French Minister Bruno Le Maire said today.
Mr Le Maire said that while the US proposal for a 15% floor would feature in the London talks, the key issue for France remains new rules on the distribution of multinational tax rights – the so-called pillar of international negotiations.