Any change in corporation tax rate would only affect very large companies Varadkar

Tánaiste Leo Varadkar has said that for the majority of Ireland-based small, medium and even large companies â€" those with turnover less than €750 million â€" the corporation tax rate will remain at 12.5 per cent, even if Ireland signs up to a global agreement on a new higher corporate tax rate.

Ireland is coming under pressure to sign up to an Organisation for Economic Co-operation and Development (OECD) plan for a global corporation tax rate of at least 15 per cent. Ireland is one of only a handful of countries holding out against the plans.

Speaking after a Cabinet meeting on Tuesday, Mr Varadkar raised the possibility that there could be two corporation tax rates in Ireland, and said that the 12.5 per cent rate would be retained for smaller and mid-size companies.

“The discussions we are having internationally at the moment only relate to very large companies with a turnover of more than €750 million a year,” he said.

“So any agreement we may or may not sign up to won’t impact the average Irish business, won’t impact even any large Irish business, or mid-caps. The 12.5 per cent rate will stay in place for them.”

If there is any change, it would only apply to those “very large companies”, he said.

The Tánaiste said other countries want Ireland to sign up to the agreement. “But that gives us a little bit of leverage, a little bit of negotiating power. So we want to make sure we’re protecting Ireland’s economic interests,” he said.

“Bear in mind many countries will benefit from an agreement on international tax, Ireland as a country will lose revenues, so we have to protect our interests, and that’s what we’re going to do.”

He defended the rate and Ireland’s industrial policy, saying: “It’s a perfect example of where low taxes result in higher revenues, and we don’t want to give that up, but at the same time, we’d prefer to be inside the tent than outside of it.”

Corporation tax had been a key part of Ireland’s “pitch” for international investment, he said.

“What has worked for us is having a low rate of corporation profit tax, and certainty about that, that it doesn’t change when the Government changes, when there’s a boom or bust or recession.

“It is a big part of our pitch when it comes to foreign investment and it has been very successful, and that’s what we want to retain. But on balance we have to make a decision at a certain point as to whether it’s better for us to be within an international agreement or without it and that’s why we can’t make a firm commitment at the moment as to whether we’ll be inside or outside that treaty.”

Mr Varadkar said he “absolutely” agreed with comments made by Taoiseach Micheál Martin, who on Monday said he will not be making commitments to US companies “one way or the other” that Ireland will be keeping its 12.5 per cent corporate tax rate.

Future

The Labour Party has called for the Government to sign up fully to the international tax reforms, saying the “writing is on the wall” over the future of the country’s corporate tax rate.

In the wake of Mr Martin’s comments in New York, where he held out on guaranteeing the future of the the ultra-low rate, Labour’s finance spokesman Ged Nash said there is an “inevitability of (tax) reform in this State, that’s been clear for some time”.

The party’s submission to Minister for Finance Paschal Donohoe’s consultation on OECD international tax reforms stops short of explicitly calling for an increase in the rate, but it does say Ireland should commit to “pillar two” of the OECD’s process, which contains a commitment to a global minimum corporate tax rate of “at least” 15 per cent.

“It is the view of the Labour Party that fully committing to pillar two will enhance our international reputation, provide important certainty for companies who wish to invest here and will help to put an end to the damaging global race to the bottom in corporate taxation rates,” the submission states.

It argues that tax loopholes and avoidances schemes that exploits mismatches between tax and residency laws in Ireland and other jurisdictions have “critically undermined the affirmative case for our 12.5 [PER CENT]rate and Ireland’s international reputation”, leading “directly” to the OECD reforms process.

“Our submission is grounded in the reality about the direction of travel of this process. It’s not the Labour Party saying we no longer support the 12.5 [PER CENT RATE], it’s an acknowledgement that the change is under way,” Mr Nash said.

“Either we shape, influence and embrace that change, or we have it imposed on us from a position of weakness.”

He said that while there is not an argument to change the rate immediately, “the writing is on the wall”.

“We don’t believe the 12.5 per cent will be retained into the future. We believe that will change, whether we like it or not.”

Tax system

Sinn Féin’s finance spokesman Pearse Doherty said there is “obviously a need to fundamentally reform the international tax system”. Sinn Féin supports the broad policy objectives set out in the OECD inclusive framework, he said.

“However it is our very clear view that any global minimum corporate tax rate under pillar two can and should accommodate our domestic rate of 12.5 per cent and it would be a serious failure on the part of the Government if they were not to achieve that in the negotiations process,” he said.

“They have clearly been struggling to get support from other states and a lot of that is due to our damaged reputation internationally as a result of successive governments actively facilitating tax avoidance and aggressive tax planning with schemes such as the double Irish and stateless companies.”

Speaking on Tuesday morning, Green Party Minister of State at the Department of Public Expenditure and Reform Ossian Smyth pointed out there is a commitment to the 12.5 per cent rate in the Programme for Government and that it was in his party’s manifesto.

“I don’t see any change about to happen imminently. We have an agreed policy on it,” he said.

Green Party finance spokeswoman Neasa Hourigan said global tax reform is now an urgent requirement to reduce income inequality and poverty, and to support communities across the world most impacted by climate change.

“Ireland’s excellent track record on international aid and progressive diplomacy is now significantly undermined by the decision in July to reject a draft agreement on international corporate tax reform from the OECD,” she said.

“This places Ireland as one of only nine countries to fail to engage with this important development.

“Ireland should be at the centre of these negotiations protecting the interests of smaller countries. There can be no climate justice without tax justice.”

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