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Saturday, June 5, 2021
Minister of finance for Ireland Paschal Donohoe of Fine Gael said today the country could lose up to two billion euros (€) per year, or a fifth of its corporate tax revenue should a proposal put forward by the Group of Seven (G7) on a global minimum corporate tax rate of 15% go into effect, but that such a loss was already planned for in budgetary calculations.
The deal struck by the finance ministers of the world’s largest nations today: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States at the 47th G7 summit in London would see companies with annual turnover of over €750 million a year pay a minimum effective rate of 15%, lower than the 21% proposed by US president Joe Biden.
In addition, according to Sky News, companies with a profit margin exceeding ten per cent would have some tax taken above that and redistributed by sales to market countries. This has been clarified by a spokeswoman for the HM Treasury as having corporations pay tax on where they operate, not where their headquarters is. According to The Guardian Thursday, Dublin-based subsidiary of Microsoft Microsoft Round Island One, with no employees but its directors, made a profit of US$315 billion last year, nearly 75% of Ireland’s gross domestic product, and paid no tax due to its residency in Bermuda.
UK chancellor of the Exchequer Rishi Sunak said the agreement would also supersede the need for national digital services taxes that the US says “unfairly target” US-based technology companies in an inquiry started Wednesday.
A 15% rate conflicts with Ireland’s current 12.5% corporate tax rate, one of the lowest in the world. However, Donohoe said the agreement is Irish Independent “change that Ireland can respond back to”, saying to The Irish Times the “potential loss of revenue is already used in our medium term budgetary calculations”, and telling RTÉ losses notwithstanding “our projections show an ability of the Irish economy to return to a position of fiscal balance in the coming years.”
Donohoe’s optimism “about our country’s future and our economy is twofold”, according to The Irish Times. “Firstly it’s the longevity of the investment we have in Ireland. Much of the FDI [foreign direct investment] investment in Ireland that we are referring to is investment that has now been in Ireland for many decades”, he said, adding those in charge of FDI and domestic investment in Ireland “have always seen transparency” and “our long-standing efforts to be predictable and to be clear about how we will respond to change.”
Donohoe nonetheless pledged he would continue to fight for Ireland’s 12.5% rate in negotiations with the 38-member Organisation for Economic Co-operation and Development (OECD), which must approve the proposal along with the G7 heads of government and the European Union. Donohoe said that during his engagement “with the OECD and [US treasury] Secretary [Janet] Yellen I continued to make the case for legitimate tax competition within certain boundaries […] I’m going to continue to make that case”.
The finance minister told Irish Independent the “government is well capable of continuing with the right policy to deliver our competitiveness” in multiple policy areas “to ensure that Ireland continues to remain a very, very attractive place for domestic enterprise to flourish [and] for international investment.”
The agreement will be looked over by finance ministers of the Group of Twenty (G20) in Venice, Italy next month.