Paschal Donohoe: No concerns about foreign investment if corporate tax rate changes

Paschal Donohoe refused to be drawn on whether the State would change the rate and said it would remain with the OECD group, in which every country involved has to ultimately reach agreement. Picture: Sam Boal/RollingNews.ie

Finance Minister Paschal Donohoe says he has no concerns about foreign investment, even if Ireland changes its 12.5% corporation tax rate.

Mr Donohoe refused to be drawn on whether the State would change the rate and said it would remain with the OECD group, in which every country involved has to ultimately reach agreement.

Negotiations are ongoing at an international level through the OECD to establish comprehensive reforms for global taxation, including minimum corporation tax, with a target for an agreement in mid-2021.

It follows an agreement made in principle among G7 countries to raise the corporate tax rate to a minimum of 15% globally.

"Ireland will be vigorously making the case for legitimate tax competition for a rate of 12.5%," he said.

"This has always been a very contested area within the European Union.

"There has been a lot of focus on our rate, and on our corporate tax policy, and I've always made the case for it.

"You've already seen many other countries come out, and now articulate their view regarding tax sovereignty and their concern regarding a higher rate... I am very confident that Ireland will continue to be a really attractive place to either grow a business and set a business up or to invest in.

I'm very confident we'll continue to maintain a really competitive economy, and be a good place to create employment in.

Mr Donohoe said his reason for not raising the rate from 12.5% to 15% is that he wants to "maintain and grow employment".

"I also want Ireland to continue to be an economy in which investment is made. We have a good share of international investment, that's also been the centre-piece of how our economy has responded back to other challenges.

"In our own economic forecasts that we did a number of weeks ago, it did indicate that because of the very good condition of national finances before we hit this pandemic that we do have the ability to get back to a position of balance in our national finances by getting people back to work."

The tax reforms would include a minimum global tax rate which would disregard where firms are physically headquartered. However, Mr Donohoe was clear no decisions have been made yet.

"We've every reason to be positive about those kinds of decisions," Mr Donohoe added.

I note the joint position by #G7 finance ministers on international corporate taxation. It is in everyone’s interest to achieve a sustainable, ambitious and equitable agreement on the international tax architecture. (1/2)

— Paschal Donohoe (@Paschald) June 5, 2021

"What is now happening in this process is national interests are being inserted. Each finance minister is making the case for their country and I'm doing the same."

Mr Donohoe said Ireland cannot rely on foreign direct investment "in the same way we used to" and "have to rely on ourselves more as the world of FDI is changing".

He added: "The world of foreign direct investment ebbs and flows in different ways at different points in recent decades, but it's going to continue to be an indispensable part of our economic model and a part of our economic model that is doing very well and continues to do very well.

"Even in this year alone, we see massive companies make really big investment decisions here in Ireland that will lead to more growth here in Ireland, but alongside that, we will continue to have this really strong domestic economy."