Writing is on the wall for Irelands 125 corporate tax rate says Labour

The “writing is on the wall” over the future of Ireland’s corporate tax system, the Labour Party has said, calling for the Government to sign up fully to international tax reforms.

In the wake of Taoiseach Micheál 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 Organisation for Economic Co-operation and Development (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.”

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 on Tuesday 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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