G7 tax accord would weigh on Ireland's credit rating as UK seeks exemption   

British expected to press for the City of London to be exempt from the plan to pay more tax to the countries they operate in

British Chancellor of the Exchequer Rishi Sunak.

The fallout of the weekend G7 agreement to push for a new global tax regime would likely weigh on the sovereign credit ratings for Ireland, as well as the Netherlands, because they host a large number of foreign multinationals, ratings firm Moody's has said.

The assessment sees the deal that proposes to overhaul ways of taxing multinationals as "mildly credit negative" for both states, if implemented, is further evidence that Ireland has potentially much to lose if the plans of the G7 — the US, Japan, Germany, France, the UK, Italy, and Canada — build wider support.  

The accord struck on Saturday went much further than setting a new global minimum tax at a rate of 15% but went on to propose collecting taxes from multinationals — likely to include Apple, Pfizer, and Google — in the "market" or countries they generate most revenues. Under the current regime, multinationals can pay their corporate taxes in the locations they chose to set up substantial bases, such as Ireland. 

The Government has become even more reliant on multinationals, not just for the jobs they create, but for the corporation tax revenues they pay to the exchequer, which at almost €12bn last year, now accounts for 20% of all of Ireland's annual tax revenues. 

Not straightforward

The Moody's assessment concurs with the views of leading Irish experts that for the G7 to reach wider agreement in the G20 and beyond "will not be straightforward".

However, it also notes the Government here has acknowledged it could lose €2bn in annual tax receipts from the multinationals, and that the Netherlands has given its backing to the G7 plan and is changing its laws "that will reduce its use as a tax haven".

Meanwhile, France has reiterated it expects to raise several billions of euros in extra revenue from the accord. French Finance Minister Bruno Le Maire said talks will continue under the process of the Organisation for Economic Cooperation and Development on rewriting the rules of cross-border taxation among 139 countries.

He also said he favoured ways of including Amazon in the tax overhaul by targeting its most profitable segments. 

Irish tax experts have said that the Government will need to build some sort of coalition of smaller states to try and push back because the G7 plans could undermine the basis on which the State's prosperity was built over the past three decades.         

More evidence the big countries, who have most to gain, are driving the proposals came as UK Chancellor of the Exchequer Rishi Sunak pressed for the City of London to be exempt from the plan to pay more tax to the countries they operate in.

Mr Sunak is expected to make the case financial services, including global banks with head offices in London, should be exempt from the plan when talks move to the G20 next month. The UK wants to make sure the “right companies pay the right tax in the right places,” the UK said.