Key Points
• Ireland increased its corporate tax to 15% from 12.5%
• The policy change will help the country to be on the same page with 140 other countries which are supporting global corporate tax
• Ireland’s Finance Department estimated that the move would reduce the country’s tax take by 2 billion euros ($2.3 billion) a year
Ireland, a country who initially decided to oppose the global tax, has a corporate tax increase to 15%--marking a massive shift in its policy.
On Thursday, the Irish broadcaster RTE reported that the Cabinet had approved to increase the tax from 12.5% to 15% for companies, which will generate an excess turnover of 750 million euros.
The news was later confirmed by Ireland’s Finance Minister, Paschal Donohoe.
Change of stance
“In joining this agreement, we must remember that there are 140 countries involved in this process, and many have had to make compromises,” Donohoe told RTE.
The Republic of Ireland earlier argued that its low tax rate makes it the most attractive place for many of the world’s largest multinationals to establish headquarters for the entire European region. The economy of the country is hugely reliant on U.S.-based multinational firms, which employ around one in eight workers.
“But I also believe that the agreement government has agreed to sign up to today is balanced and represents a fair compromise reflecting the interests and input of the many countries involved in the negotiations, ” Donohoe said.
Ireland’s Department of Finance estimated that joining the deal would reduce the country’s tax take by 2 billion euros ($2.3 billion) a year, according to RTE.
Minimum 15% corporate tax globally
The global minimum corporate tax is an initiative taken by the United States and other major countries in the world to set a uniform minimum tax of 15%, to tackle the problem of tax evasion, where companies operating in a country but headquartered in a country where the corporate tax is minimum to none.
The G-7 and G-20 nations agreed earlier this summer to harmonize rules across the globe. The plan, if implemented, would force multinationals to pay tax where they operate and not just where they have their headquarters.
Ireland’s change of stance followed a revised text in the bill, which The initial deal mentioned a minimum corporate tax rate of “at least 15%,” but this has been updated to just 15% — signaling that this rate will not be pushed up at a later date. Ireland has also given assurances that it could keep the lower rate for smaller firms located in the country.
Picture Credit: Al Jazeera