Big investment hubs dodge a bullet in global tax overhaul

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DUBLIN, Oct 8 (Businesshala) – Ireland may have done the once unthinkable by dropping its prized 12.5% ​​corporate tax rate in a global shift, but it and other developed nations are splitting the spoils of foreign direct investment. continue.

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Some 136 countries on Friday agreed the first major change in a generation of rules to tax multinationals, including a global minimum rate of 15%, with measures aimed at discouraging them from booking profits in low-tax countries .

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The efforts received a major boost by Ireland dropping its opposition on the eve of the deal. But many developing countries say their interests have been sidelined, while charity Oxfam calls the agreement “a rich country stitch-up”.

“We will continue to compete with largely equal jurisdictions,” said Martin Shanahan, head of IDA Ireland, the state investment agency that convinced the likes of Apple, Facebook and Pfizer to set up European headquarters in the country of just 5 It’s a million people.

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Adding future technology giants to that list still means the possibility of going up against Berlin and London. For pharmaceuticals and medical devices, the toughest competition will be from Switzerland and Singapore.

Shanahan has pointed to Spain and parts of Eastern Europe in recent years as increasingly competitive in the race for multinational investment that directly accounts for one in six Irish jobs.

“embarrassing” deal

Corporate tax rates in many of those competing countries are well above the global minimum of Ireland’s current 12.5% ​​and the upcoming 15%. Dublin has long argued that it takes more than just low taxes to attract investment, pointing to Ireland’s young, highly educated workforce and EU membership.

Announcing the opening of a new European headquarters in Dublin this week, US online gifting platform Sendoso said corporate tax was a very small factor and the global deal did not change Ireland’s strategic advantages as a location.

The head of Ireland’s National Treasury Management Agency said on Thursday that digital payments giant Stripe never levied taxes while discussing plans to speed up hiring in Ireland. The Irish Sovereign Wealth Fund, which is managed by NTMA, invested in the US startup’s latest funding round in March.

Still, low-tax countries could have suffered worse consequences. The United States, which recently led the charge of attacking a deal, initially wanted a 21% minimum rate and in July the draft OECD agreement settled at “at least 15%”.

Dublin lobbied hard for the removal of “at least”. If successful, the government said it has maintained the stable business environment needed to compete for investment.

Peter Welle said, “If we had ‘at least’ a 15% rate, this would have created a lot of uncertainty about the attractiveness of our regime and could have limited new investment and a potential outflow of existing investments.” ” Tax partner at Grant Thornton in Ireland.

“We played a strong hand and I think it ended well.”

Effective protection of the status quo – although multinationals are coughing up more and more of their profits – has angered developing countries that see few gains.

Argentina’s Economy Minister Martin Guzmán said on Thursday that the proposals forced developing countries to choose between “something bad and something bad”. Argentina had reluctantly signed the previous version of the deal.

Oxfam’s tax policy lead Susanna Ruiz said in a statement: “It is shameful that the legitimate concerns of developing countries are being ignored, while countries such as low-tax Ireland have been able to reduce the already limited aspects of the deal. “

“A proposal for a fixed global rate of 15% would benefit rich countries enormously and increase inequality.”

Ireland knows how long it takes to catch him. As recently as 1980, when Apple founder Steve Jobs arrived to open his first plant outside the United States, Ireland was one of the poorest countries in Europe, with an unemployment rate approaching 17%.

“We opened up the economy in the 1950s and before that we were probably introverted, protectionist and poor,” said Shanahan of IDA Ireland, looking even further back.

“It takes a long time to build capacity and offering.” (Reporting by Pedric Halpin; Editing by Katherine Evans)

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