Ireland agrees global tax deal, sacrificing prized low rate

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DUBLIN (Businesshala) – Ireland on Thursday abandoned protests over an overhaul of global corporate tax rules, agreeing to drop its prized 12.5% ​​tax for large multinationals in efforts to enforce a worldwide minimum rate. expressed.

FILE PHOTO: Commuters make their way to work in the morning in the financial district of Dublin, Ireland, October 18, 2018. Businesshala/Clodag Kilcoyne

Ireland, the low-tax European headquarters for blue chip companies including Apple, Google and Facebook, refused to sign an initial deal in July, objecting to a proposed rate of “at least” 15%.

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An updated text dropped “at least” this week, clearing the way for ministers to do what subsequent governments have said they would never consider – dropping the low rate that has stymied Ireland’s investment for decades. and helped to win jobs.

“Joining this agreement is an important decision for the next phase of Ireland’s industrial policy – a decision that will ensure that Ireland is part of the solution,” Finance Minister Pascal Donohoe said at a news conference.

“It’s a difficult and complicated decision but I believe it’s the right one.”

A handful of countries barged into the July deal brokered by the Organization for Economic Co-operation and Development (OECD), which marked the first rewrite of international tax rules in a generation.

The holdouts, which include fellow EU members Estonia and Hungary, cannot block the proposed changes. The 140 negotiating countries are to meet on Friday to finalize the agreement.

If Ireland had maintained its low rate, multinationals that book profits there may be forced to pay additional taxes elsewhere under the proposals.

The government said it had received assurances from the European Commission that Ireland could maintain a 12.5% ​​rate for firms with annual turnover of less than 750 million euros ($867 million) and tax incentives for research and development. Is.

Donohoe said the commission also promised that it would faithfully stick to the OECD agreement and would not demand higher rates among member states.

‘No tangible effect’

While Ireland wrestled with possible changes for months, this would not be the first change to its tax system.

A 10% tax rate persuaded Apple to set up a manufacturing facility following Microsoft and Intel in the 1980s.

The government raised this to 12.5% ​​in 1997 to comply with EU state aid rules and increase multinational jobs.

The 12.5% ​​rate was fiercely defended in the intervening years, particularly when Ireland came under pressure to raise it as part of the 2010 international bailout.

Many analysts expect Ireland to remain competitive in the fight to attract foreign direct investment.

Donohoe said some 1,500 multinationals that would be affected by the higher rate currently employ about 400,000 people, or one in six workers, in Ireland.

“We are confident that this will not have a significant impact,” said Kieran McQueen, a research professor at the Economic and Social Research Institute (ESRI) think tank.

“As a country matures, the flexibility of our workforce, other factors such as EU membership also become very important,” he said.

($1 = 0.8649 Euro)

Reporting by Padraic Halpin; Editing by Jason Neely, John Stonestreet and Alexander Smith

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