Ireland defends tax regime amid demands for global minimum rate – POLITICO


DUBLIN — Ireland says it will “push back” against global demands to hike its low headline rate of corporate tax that has helped woo hundreds of American firms to the Emerald Isle, even as some opposition lawmakers suggest the country is swimming against the tide.

“We are standing over our 12.5 percent corporation tax rate,” Deputy Prime Minister Leo Varadkar told reporters in Dublin.

Ireland for decades has parried demands from EU heavyweights Germany and France to raise its rate. They argue that the Irish unfairly poach U.S. corporate investment that might otherwise head their way, where headline rates are nearer to 30 percent.

“It’s been a huge part of our economic model. Ireland takes in twice as much per head in corporation profit tax in comparison to other countries. It’s a very good example of how low taxes can actually result in higher revenues,” said Varadkar, who is also Ireland’s trade minister. “We are going to push back very strongly against anything that might jeopardize that.”

The past quarter-century has coincided with the enticement of more than 1,000 multinationals to Ireland’s shores, including most of the top U.S. social media, tech, pharmaceutical and medical devices firms. Ireland today derives a fifth of its entire tax take, a third of its workforce, and half of its income taxes from foreign multinationals.

As a direct result, and unlike the rest of the EU, Ireland’s export-heavy economy has continued to expand throughout the pandemic.

As the fight against the coronavirus swells nations’ deficit spending, growing U.S. criticism of low-tax jurisdictions like Ireland has reached a potential tipping point.

Writing in the Washington Post, U.S. Treasury Secretary Janet Yellen and the finance ministers of Germany, Indonesia, Mexico and South Africa argued that low-tax jurisdictions are starving other economies of much-needed revenue as all nations fight a global pandemic.

“Corporations’ capital income too often finds its way to low-tax jurisdictions as the world’s most profitable companies adroitly reduce their tax burdens,” Yellen and the finance ministers wrote. “Beyond revenue loss, governments live in fear of overtaxing corporations, lest those companies move their operations — and jobs — offshore. The dynamic that has arisen in the past half-century is, in the classic economic sense, a race to the bottom with respect to corporate tax rates.”

Their opinion piece didn’t single out Ireland, where Finance Minister Paschal Donohoe dismisses claims that Ireland is driving a “race to the bottom” — because the Irish have offered that world-beating bottom for decades. Ireland used to charge a headline rate of only 10 percent, but raised it gradually to 12.5 percent from 1996 to 2003.

The potential for a globally agreed 15 percent minimum effective rate, endorsed by the G7 group of wealthy countries, fuels speculation here that Ireland could be forced, or agree voluntarily, to apply that hike to its own rate.

But Varadkar rejected a Financial Times report suggesting the idea was gaining traction in Ireland. He noted that the piece quoted two opposition lawmakers who incessantly snipe at the government.

He said Donohoe, who is also president of the 19-nation Eurogroup, would rally support from other smaller nations that want to retain investment recruitment advantages. “We’re going to be inside the tent,” Varadkar said, “but our firm stance is that the 12.5 percent stays.”

One of the opposition lawmakers quoted by the FT questioning this position, Labour Party finance spokesman Ged Nash, accused the government of fighting a global wind of change. Labour currently holds only seven seats in Ireland’s 158-member parliament.

“No amount of wishful thinking will change the fact that the G7 agreed at the weekend to a global minimum tax rate of at least 15 percent for big companies. If that comes into effect, many multinationals based in Ireland will be paying that rate of tax, either to the IRS in the United States or to the Revenue here,” Nash said.

Varadkar, he said, “can’t stick his head in the sand and pretend this isn’t happening. This is a stated priority of Joe Biden’s presidency.”




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