For Ireland, all eyes on Biden tax plans after conceding 15% rate

Ireland's signing up to the higher global corporate rate may not be the end of the concessions facing the Government, as attention switches to legislative plans driven by US President Joe Biden that could have far-reaching effects on US multinationals operating in Ireland.       

The Government dropped its opposition and has now joined around 140 countries who have given their consent to the OECD's proposals for the global setting of a 15% minimum rate for taxing big multinationals around the world. It has hailed assurances from the EU that the current 12.5% rate will apply to the bulk of Irish firms. 

For Ireland, analysts say that plans by the US administration, that could set a rate above 15% on the overseas earnings of its multinationals, now take centre stage.             

Peter Vale, tax partner at Grant Thornton Ireland said the focus switches to the US. "However, as the OECD process nears resolution, arguably the greater threat now to foreign investment in Ireland will be any future US tax changes. 

Lorraine Griffin, head of tax at Deloitte, also focused on potential US tax levels. “All eyes will be on the US legislative process over the coming months and achieving an outcome aligned with agreed OECD proposals would be a positive result for Irish business compared to a range of US tax reform proposals that have been put forward to date," Ms Griffin said.                                             

Broker Goodbody said Ireland still has one of the lowest corporation tax rates in Europe, while others, including the UK now outside the single market and Ireland's "biggest competitor" for foreign direct investment, is hiking its corporation tax rates in the coming years.  

"It is noteworthy that the reaction of the business community here to the news is one of a relaxed nature. The focus for Ireland must now be on how the country can remain competitive in areas outside of tax," the broker said. 

The agreement "marks a watershed for the Irish business model", said business group Ibec. "Implementation of the new regime must also be cognisant of the final texts of both the OECD agreement and potential US legislation to ensure that Irish-headquartered companies are not disadvantaged in their global operations," said its chief executive Danny McCoy.

Chambers Ireland chief executive Ian Talbot said that "the quality-of-life issues" involving competitiveness must be tackled.

Mark Redmond, chief executive at American Chamber of Commerce Ireland, said US FDI in Ireland accounts for 20% of private sector jobs through direct and indirect employment. 

However, Sorley McCaughey, head of policy and advocacy at Christian Aid Ireland, said the deal fell "far short" of what was required. Multinationals around the world may end up "carving exemptions for themselves to allow them to continue to pay an effective far lower rate", she said.