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Done deal Ireland to join global 15pc corporate tax deal with 12.5pc rate to remain for some companies

Only companies with turnover above €750m will be hit with new 15pc rate, Taoiseach Micheál Martin says

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Tánaiste Leo Varadkar. Photo: Gareth Chaney/Collins

Tánaiste Leo Varadkar. Photo: Gareth Chaney/Collins

Tánaiste Leo Varadkar. Photo: Gareth Chaney/Collins

Ireland will formally join a global tax deal that sets a 15pc minimum rate on multinational profits.

The Minister for Finance confirmed the decision after a cabinet meeting on Thursday.

“This is the right decision,” said Paschal Donohoe. “It is a sensible and pragmatic decision made by the government in the interests of our country, and ultimately, a decision that I believe will be critical to conditions to create longer-term certainty for businesses and investors, which in turn will be to the benefit of many thousands of employees in the future.”

Mr Donohoe said not joining the deal would entail “reputational” as well as “economic and budgetary" risks.

The 15pc minimum rate will affect 56 Irish firms employing around 100,000 people and 1500 foreign-owned multinationals with around 400,000 staff.

The European Commission has assured the Government it will be “faithful” to the OECD deal when it brings it into EU law by 2023.

And the Government will be able to keep the current 12.5pc corporate tax rate for companies with less than annual revenues of €750m.

Mr Donohoe said this affects 160,000 businesses and around 1.8m jobs.

“They will continue to participate in the benefits of our long-standing 12.5pc rate,” Mr Donohoe said.

The American Chamber of Commerce Ireland (ACCI) said a higher corporate tax rate in Ireland will not result in the exodus of US firms. ACCI chief executive Mark Redmond said 94pc of multinationals based in Ireland have a really favourable view of the country for continuing investment.

“I have never seen the current level of confidence in Ireland as an inward investment location,” he said on Thursday.

However, global corporate tax reform is the “number one concern” for multinationals in Ireland now, the head of the National Treasury Management Agency said.

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Conor O’Kelly told a Dáil committee on Thursday that we shouldn’t “overstate” the effects of the tax change but that companies “are watching developments very, very closely”.

The deal has taken more than three years to negotiate, led by the Paris-based Organisation for Economic Cooperation and Development (OECD).

A total of 134 out of 140 countries supported an initial deal inked in July, after the US came on board earlier this year.

A reference to “at least” 15pc was removed from that draft deal this week on the back on an Irish request

Earlier, Tánaiste Leo Varadkar has denied that the 15pc global tax rate was about fairness towards less developed countries.

He said it was in fact a case of big countries trying to take money off Ireland.

“It's been about larger countries, big countries, wealthy countries, who think we're getting too much, and they want to take some of that off us,” he told TDs at Leaders’ Questions. “That's what we have to protect and push back against.”

The Fine Gael leader said Finance Minister Paschal Donohoe, his party colleague and head of the Eurogroup, had “handled these negotiations very well”.

He has “made sure that we've got the concessions and protections that we wanted,” Mr Varadkar said.

If Ireland had “folded earlier”, as some in the opposition wanted, “I don't think he would have been able to secure the reassurances that he has in the past couple of weeks,” the Tánaiste said.

“Huge efforts were made by other countries to get us into the tent. We had our price for that,” he added.

It comes as Taoiseach Micheál Martin said only companies with a turnover above €750m per year will be hit with the expected 15pc tax rate.

Ireland hung back from the deal under the aegis of the OECD endorsed by most countries earlier this summer and sought more details.

One of these was an assurance that the threshold would not exceed 15pc in the future – a fear fuelled by inclusion of the phrase “at least 15pc” in the OECD text. The other was an upper limit aimed at protecting small and medium-sized firms.

Today Mr Martin said both issues have been resolved. Speaking at Technological University Dublin in Grangegorman he signalled a government decision is now imminent.

“Basically the OECD consensus right now is larger companies over 750m. So the vast majority of SMEs will not be impacted by the measures if the Government takes a particular decision today,” the Taoiseach said.

Asked about the potential hit to the economy, Mr Varadkar said the most recent projections were that we would lose in the region of €2bn a year, he said, “but nobody knows that for sure. It is only an estimate. There are so many variables, but it is possible.”

Labour party spokesman Ged Nash said the change to a 15pc rate for multinationals was an “extremely momentous shift,” calling on Mr Varadkar to confirm that 12.5pc would continue to apply to indigenous companies on lower turnover than the giants. The new rate applies to firms with global turnover in excess of €750m annually.

He asked if Mr Varadkar still believed that he and the Labour Party “are damaging the national interest” by arguing for the new rate, which could possibly cause Ireland to gain revenue.

“We could be quids-in here. We could we gain on the swings what we will lose on the roundabouts.”

The Tánaiste said Mr Nash was a former trade union negotiator and it is “deeply unhelpful when somebody on your side makes concessions on your behalf” when going into talks.

He added: “Our 12.5pc corporate profit tax has been a huge success. It's a really important that part of our industry policy and strong cross-party support.”

Over a quarter million people work in multinational companies in Ireland, he said. “We want to keep those jobs, and the 100,000 or so indirect jobs that arise from them.”

Ireland had taken about €12bn a year in corporation tax – roughly double the average European country on a per-head basis, and it was “proof positive” of lower taxes producing higher revenues in a highly mobile world.

Ireland, in the talks with international partners, wanted to make sure that whatever ratio is agreed to “won't ratchet up over time,” Mr Varadkar said.

“We also wanted to ensure that for small or middle-sized companies, that we can continue to charge the lower rate of 12.5pc.”

This country also wanted to make sure that our R&D (research and development) tax credit was protected, and to make sure that if countries signed up to the new structure that the rules were actually implemented, he said.

“We don't want to find ourselves to be the ones who implement, while our competitors do not. That would be a disadvantage to us. So those are the issues that are currently in play.”

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