'Make or break' Cabinet meeting could see Ireland abandon 12.5% corporation tax rate

The Government will be in a position to confirm the Irish position on the OECD process this week, finance minister Paschal Donohoe told reporters in Luxembourg.

'There is a need for further engagement both with the OECD and the Commission', says finance minister Paschal Donohoe. Picture: Valeria Mongelli/Bloomberg

A ‘make or break’ Cabinet meeting on Thursday will examine revised OECD proposals which are likely to see Ireland abandon its 12.5% corporate tax rate.

Cabinet ministers will discuss the matter when they are briefed by finance minister Paschal Donohoe ahead of Friday's meeting of the OECD on the Inclusive Framework.

Mr Donohoe told reporters in Luxembourg that progress has been made, and while more needs to be done, a decision to adopt the global minimum rate could be taken this week.

“There is a need for further engagement both with the OECD and the Commission," he said. "All of that is under way. 

The Government will form a view on this matter later in the week. At that point, I’ll be in a position to confirm the Irish position on this important matter.”

Mr Donohoe confirmed efforts are being made to reach agreement on corporate tax reform in “the coming days”.

“I have to brief the Irish Government on that text first," he said. "I’ll be doing that on Thursday. 

"The Government will then make a decision in relation to the OECD process. I’ll be able to answer questions on that text once I’ve briefed my Cabinet colleagues.”

On RTÉ's Drivetime, Tánaiste Leo Varadkar said the new text "does respond to a lot, if not all, of the concerns" that the Government has raised with the OECD agreement.

Mr Varadkar said he expects the Government will be ready to issue a response either after the Cabinet meeting on Thursday, or on Friday.

Back in July, the Irish Examiner first reported that the Government was moving to abandon the 12.5% rate, which has been a cornerstone of Irish taxation policy for decades.

Mr Donohoe refused to sign up to the OECD proposal at that point, over concerns that the new global rate could be “at least 15%". He said the Government must be in a position to offer clarity and certainty to firms seeking to invest here.

Mr Donohoe was in Luxembourg to chair a meeting of the finance ministers of the euro area.

It focused on eurozone inflation and energy prices, with ministers also covering preparation for upcoming international meetings, including exchange rate developments.

Ahead of the meetings, Mr Donohoe said October is a critical period in which EU governments finalise their budgets.

He said that on the economic front, the latest news on the euro area's recovery remains robust, and growth is expected to be approximately 5% this year.