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 after a Cabinet meeting on Tuesday, Tánaiste Leo Varadkar said he “absolutely agreed” with Mr Martin’s commens about the corporate tax rate.

“I absolutely agree with what the Taoiseach said yesterday, we are in discussions internationally regarding a new international agreement on corporation profit tax,” said Mr Varadkar.

“We’re committed to that process, we can’t say at this stage whether we’ll sign up to that an international agreement or not, so we can’t make a commitment either way.”

Mr Varadkar said any new corporate tax rate would only apply to companies with a turnover of €750 million or more, raising the possibility that two rates could ultimately arise.

He said Ireland would ultimately prefer to be part of any international agreement on tax but that as negotiations are ongoing and other countries want Ireland to be in the agreement, “that gives us a little bit of leverage and a little bit of negotiating power”.

Mr Varadkar said Ireland would prefer to be “inside the tent” than outside.

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 OECT 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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