Raising corporation tax to 15% will cost Ireland €2bn annually, says Varadkar

Tanaiste Leo Varadkar said agreeing to a new international rate would ensure that no other countries could undercut us.

Increasing corporation tax to 15% will result in an estimated €2bn loss in revenue each year, the Tánaiste has told the Dáil.

The Cabinet is expected to sign off on an OECD agreement that would see Ireland's 12.5% corporation tax rate increase to 15% for large multinational companies.

Leo Varadkar has told the Dáil that the current corporation tax rate had been a "huge success" and accounts for almost €12bn in revenue each year, which is roughly double what the average European country takes in on a per capita basis.

Assumptions

"Our existing projections are that any change of this nature will reduce our revenue by about €2bn a year. But that is only an estimate. Nobody can know that for sure. It's based on certain assumptions which may or may not be correct," Mr Varadkar told the Dáil.

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Agreeing to a new international rate would ensure that no other countries could undercut us, which Mr Varadkar said has happened in the past.

Labour's Jed Nash said he had been accused of "damaging the national interest" back in June when he said that Ireland could "live with" a small increase in the tax rate.

Mr Nash said the Government could have "boxed off" the agreement to raise corporation tax to 15% very early on and avoided months of speculation and uncertainty on the matter.

He asked the Tánaiste to admit that he was wrong and to accept that to withdraw his "patronising charge".

However, Mr Varadkar said the comments made by Mr Nash were "deeply unhelpful" and "damaging" at the time.

"I understand you're a former trade union negotiator, you understand negotiations as I do too and that is deeply unhelpful, when somebody on your side — and we were at Team Ireland on an issue like this — makes concessions on your behalf," he told Mr Nash.

Highlighted

Mr Varadkar highlighted a number of issues, including having the right to retain the 12.5% rate for small and medium-sized companies, that are essential to any agreement.

He told the Dáil that the Government also wants to ensure that the R&D tax credit is protected.

"We also want to make sure that if countries sign up to this they actually implement it.

"We don't want to find ourselves being the ones who implement it and our competitors then do not because that would be a disadvantage to us, they are the issues that are currently in play," he said.

Solidarity-PBP TD Richard Boyd Barrett said the Government had spent months and months trying to avoid increasing corporation tax and claimed ministers were "willing to die in the ditch" to protect large multinationals.

"Why do you think it's okay to try and prevent a little bit of extra tax being imposed on these staggeringly profitable corporations, while you will do nothing, in fact you patiently oppose efforts to reduce the tax burden on ordinary working people in this country?" he asked.

Mr Varadkar said 450,000 people work for multinational companies in Ireland and the Government must protect those workers and the revenue base.

Not impacted

Meanwhile, Taoiseach Micheál Martin has indicated that the majority of companies will not be impacted by any increase in corporation tax.

Pointing to the fact that the agreement has now taken out the reference to setting corporation tax at "at least 15%", Mr Martin said: “Most companies that are located in Ireland have said they want certainty and they want continuity, they don’t want every two years changes as that affects their planning."

“And where this levels out, I don’t think will impair our competitiveness.”