Irish Examiner view: Devil is in the detail in agreeing a global tax rate

Government expected to commit to increasing Ireland’s rate — but only if it secures changes to the current draft agreement

Finance Minister Paschal Donohoe. Picture: Niall Carson/PA

The indication by Finance Minister Paschal Donohoe that Ireland will agree to implement a higher corporate tax rate may be seen in some circles as capitulation to the needs of bigger and more powerful countries. 

It is undoubtedly true that the United States, France, Germany, and Britain are among a host of countries within the Organisation for Economic Co-operation and Development (OECD) that have been seeking a global corporate tax rate of at least 15%. 

However, Mr Donohoe appears to favour tax rate certainty over retaining the rate at the current 12.5%.

That is why the Government is expected to decide next week to enter the OECD agreement and commit to increasing Ireland’s rate — but only if it secures changes to the current draft of the agreement. 

The prospect of abandoning the current rate was outlined last July in the Irish Examiner by our Political Editor Daniel McConnell. Now it looks like that is going to happen sooner rather than later.

Speaking yesterday on RTÉ’s Morning Ireland, Mr Donohoe said the Government could not sign up to an agreement without certainty about what the future tax rate will be. 

The Government wants the OECD to change the text from “at least 15%” to “just 15%”, as it fears that the “at least” formulation could lead to future rises in the rate. 

If he secures that major change, it would be a good deal, even if it means a two and a half percent increase in our rate.

In any event, Ireland cannot really remain an outlier by staying outside the agreement. The main reason for this is the attitude of US President Joe Biden. 

Though he declares himself Irish and supports our position on the Northern Ireland Protocol, when it comes to tax matters he is not prepared to do us any favours. The opposite, in fact. 

The President is targeting extra revenues from what he termed “tax havens” for US companies overseas. If, as expected, the US signs up to the OECD deal and Ireland stays out and keeps the current rate, the President has decreed that major American companies would in the future be liable for top-up payments in the US. 

This would mean American companies based here would pay more tax in the US, in addition to the 12.5% paid here.

As this would be a serious disadvantage to the company and would mean a loss of income for the Irish exchequer — which could otherwise collect all the tax here — it would make no sense to stay out. 

The best we can hope for is an agreed 15% rate, with assurances that we will not be pressured into adopting a higher rate in the future.

At a domestic level, a global minimum corporate tax rate may highlight how Ireland’s tax policy has served multinational corporations far better than it has ever served its ordinary workers, many of whom pay the marginal rate of 52% which applies to incomes above €32,800. 

While the real rate is lower when allowances are factored in, the amount paid in tax by an individual is still considerable.

The OECD mantra is that fairness demands an agreed international rate. That should apply domestically, too. 

It is hardly fair for the owners of Google and other multinationals to enjoy a far lower tax rate than their employees.