Government ends resistance: Ireland approves global minimum tax

Ireland is giving up its opposition to the proposed reform of global corporate taxation. This means that an important hurdle has been overcome on the way to a global minimum tax.

The Irish government has decided to increase the tax rate for companies with a turnover of more than 750 million euros from 12.5 to 15 percent. The previous low-tax country is still supporting the planned global reform of corporate taxes. So far the Dublin government has always defended its low tax policy. It is an important business model for the country, because many digital companies have their European headquarters there for tax reasons.

In the EU country, dozens of companies with hundreds of thousands of employees are affected by the change, which is expected to come into force in 2023. The government in Dublin estimates its losses due to the tax increase at 800 million to two billion euros per year.

“A pragmatic decision”

“That is the right decision, a sensible and pragmatic decision,” said Finance Minister Paschal Donohoe. He assumes that the agreement will give the economy stability and planning security in the long term. The EU Commission had assured Ireland that it wanted to stick to the global tax rate and not seek an increase for the EU member states. Donohoe is convinced that his country will continue to be an attractive location for international investments.

Irish Deputy Prime Minister Leo Varadkar told RTÉ that the government had been assured that it was a “once in a generation” move and that the tax rate would not rise any further. Varadkar emphasized that the corporate tax was “exactly” 15 percent and not “at least” 15 percent as initially requested. The government then concluded that it was better for Ireland to participate.

In addition to Ireland, Estonia and Hungary from the EU had so far resisted the reform. Estonia has now also given up resistance.

Hundreds of billions of additional income?

The finance ministers of the leading industrialized and emerging countries (G20) agreed in July on a reform of the international tax rules in the digital age. Internationally active companies should pay “at least” 15 percent tax regardless of their location. If a company with its subsidiary pays less taxes abroad, the home country can collect the difference. This is to prevent profits from being shifted to tax havens. In addition, large companies should no longer be taxed only in their mother country, but also where they do good business.

So far, the industrialized countries organization OECD has calculated an additional tax revenue of 150 billion dollars worldwide from the minimum tax alone, which corresponds to around 130 billion euros. The redistribution could bring the so-called market states again more than 100 billion dollars.

There is no reliable information on the effects on the tax authorities in Germany. Almost all OECD countries had already given their approval at working level, including well-known tax havens such as the Cayman Islands.