Donohoe: Ireland risks losing €2bn a year under global tax reforms

Sat, 05 Jun, 2021 - 18:16

Patrick Daly, PA

Finance Minister Paschal Donohoe has said the Government could lose around €2.2bn a year in revenue if today's G7 agreement on corporation tax reform is implemented.

He made the comments after the G7 nations struck a historic deal to introduce a global minimum tax of at least 15%.

The agreement, reached after years of negotiation, creates a global base rate of corporation tax and reforms the tax system for online giants.

Mr Donohoe said the Department of Finance had already built in expectations of lost corporate tax revenue into Budget plans. He said that even with losses of this level, he expected the Government could balance its books in the coming years.

Following two days of talks in London with G7 finance ministers, including colleagues from the US and Germany, the UK Chancellor announced that they had signed up to having a corporation tax rate of “at least 15%”.

Mr Donohoe attended the meeting in his capacity as President of the Eurogroup.

Changes will also be made to ensure major corporations, especially those with a strong online presence, will pay taxes in the countries where they record sales and not just where they have an operational base.

The new policy is thought to be aimed at the likes of tech giants Amazon and Microsoft.

Speaking after a meeting at Lancaster House, UK Chancellor Rishi Sunak said: “I am delighted to announce that today after years of discussion G7 finance ministers have reached a historic agreement to reform the global tax system.

“To make it fit for the global digital age, but crucially to make sure that it is fair so that the right companies pay the right tax in the right places and that’s a huge prize for British taxpayers.”

The agreement is due to be pored over in further detail at the G20 financial ministers and Central Bank governors meeting in July

The move will add to pressure on Ireland's 12.5% rate, which has helped attract a huge number of multinationals, including Apple, Pfizer, Google, and Facebook, to set up bases here.

(left to right) EU's Economy Commissioner Paolo Gentiloni, Eurogroup President Paschal Donohoe, World Bank President David Malpass, Italy's Finance Minister Daniele Franco, French Finance Minister Bruno Le Maire, Canada's Finance Minister Chrystia Freeland, Britain's Chancellor of the Exchequer Chancellor Rishi Sunak, Managing Director of the IMF Kristalina Georgieva, Germany's Finance Minister Olaf Scholz, U.S. Treasury Secretary Janet Yellen, Secretary-General of the Organisation for Economic Co-operation and Development (OECD) Mathias Cormann, Japan's Finance Minister Taro Aso, as finance ministers from across the G7 nations meet at Lancaster House in London ahead of the G7 leaders' summit.

Under the G7 agreement, Ireland would have to ensure its multinationals, including CRH, Ryanair, Kerry Group, Kingspan, and Glanbia, are taxed at the minimum global rate.

Speaking about this afternoon's agreement, Finance Minister Paschal Donohoe said it is in everyone's interest to achieve a "sustainable, ambitious and equitable" agreement.

He said will engage with the Organisation for Economic Co-operation & Development (OECD) as any agreement will have to meet the needs of small and large countries, developed and developing alike.

Mr Donohoe has also met with US treasury secretary Janet Yellen while in London.

Ms Yellen has said the global minimum tax would end the 'race-to-the-bottom' in corporate taxation.

"The global minimum tax would also help the global economy thrive, by leveling the playing field for businesses and encouraging countries to compete on positive bases, such as educating and training our work forces and investing in research and development and infrastructure," she said this afternoon.

Ms Yellen hailed the commitment made by the G7 finance ministers as significant and unprecedented.

Ireland faces 'unending cycle' of global assault on the way it taxes multinationals