Irish Examiner view: G7 deal highlights two-tier economy

Corporate tax highlights the differences between the booming multinational behemoths and local indigenous industries struggling after the pandemic

 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, as finance ministers from across the G7 nations meet at Lancaster House in London. Picture: Henry Nicholls/PA Wire

The agreement on Saturday by G7 nations to push for a 15% minimum corporate tax rate could cost Ireland an estimated €2bn a year, the equivalent of about two-thirds of the annual housing budget, a comparison that illustrates how much our contentious 12.5% rate contributes to the national coffers.

That favourable rate has attracted several multinationals to our shores although, many argue, access to Europe and our qualified workforce were also factors. It remains to be seen, though, how long Ireland can continue to be out of step with global tax policy reform.

The G7 nations, and in particular the US, are understandably intent on ensuring that multinationals pay their fair share of tax. Finance Minister Paschal Donohoe has said he will continue to argue that small countries be allowed to retain lower tax rates. He was quoted as being “very, very confident” that Ireland would remain an attractive place for international investment.

Saturday’s “historical deal” is just a step in a process not yet complete but it again highlights the nature of our two-tier economy, a division exacerbated by the pandemic. On one side, the Covid-resistant pharma and tech giants surged ahead while, on the other, hospitality, retail, and local manufacturing took an unprecedented hit.

The real job of the Government now is to reconcile the differences between these two sides and do what it can to stave off a two-tier recovery.