Janet Yellen: No cajoling Ireland over global tax overhaul

The US Treasury Secretary's visit to Ireland comes after the Government last month signed up to an agreement to increase the tax on multinationals and large companies to 15% - up from the existing headline rate of 12.5% under Ireland’s long-standing regime

US Secretary of the Treasury, Janet Yellen. Picture: AP Photo/Alessandra Tarantino

US Treasury Secretary Janet Yellen said she had productive talks but had not cajoled Ireland to sign up last month to the accord for a global corporate minimum tax rate.

Speaking in Dublin, Secretary Yellen said that no country was a winner from the "so-called race to the bottom" and multinationals would now pay their fair share to governments around the world.

She told reporters that she had held talks earlier this year to try to understand Ireland's position, adding that the global accord serves the interests of Ireland and all countries. She said she had not cajoled Ireland into making its decision on the tax accord.

Her visit to Ireland comes after the Government last month signed up to an agreement to increase the tax on multinationals and large companies to 15% - up from the existing headline rate of 12.5% under Ireland’s long-standing regime.

The Government had fought a rearguard action to soften the initiatives to overhaul the way multinationals are taxed.

The global agreement has been driven by the largest and most powerful economies - including the US and France - who have long complained that low-tax countries like Ireland are taking too much of the global tax pie that should instead go to their exchequers.

Finance Minister Paschal Donohoe reiterated on Monday the Government has estimated that the agreement will in time cost the Irish exchequer €2bn in corporate tax receipts that it would otherwise have raised from multinationals based here.

Mr Donohoe said the visit of Ms Yellen showed the strong economic ties between Ireland and the US. The tax accord brings much-needed "stability", he said.

On the spike in US inflation and referring to global supply chain bottlenecks, Ms Yellen said that it was "transitory" and was related to the pandemic. She said that the US economy was not overheating.

A handful of multinationals such as Apple, Pfizer, and Google account for the vast bulk of the almost €12bn the Government raised last year in corporate tax receipts.

Corporate tax receipts account for a record 20% of all Government tax revenues.

The global agreement may also likely in time dilute the lure of Ireland’s tax regime. Some experts have warned that the most powerful countries will return to once again hike the global tax rate.

Over three decades, Ireland has profited enormously by attracting a huge number of multinationals to set up base here, lured by the 12.5% tax regime.

Multinationals such as Pfizer, Apple, and, Google, brought thousands of jobs.

The Government said last month that an agreement with the EU for Ireland to run two corporate tax rates.

Most small Irish-owned firms will continue to pay the 12.5%, while the higher rate of 15% will apply to very large companies, including foreign-owned multinationals and large Irish-owned firms.

The process is being driven by the G7 and G20 of the wealthiest and most populous economies and coordinated by talks in the OECD of around 140 countries, including Ireland.

The 15% rate will apply to large companies with a turnover of €750m, or more.

That means, said the Government, that 1,500 foreign-owned multinationals employing 400,000 people, as well as 56 Irish-owned companies which employ 100,000 people will now pay a higher rate of 15%.

Some 160,000 firms employing 1.8 million people will continue to pay the 12.5% rate.