Last Saturday, the U.S.A., Britain, and other leading nations agreed to a minimum rate for global corporation tax of at least 15% and agreed firms should pay more tax in the markets where they sell goods and services rather than in the country where they book profits.
This news comes on the heels of new VAT rules explained in detail by IPBN Fiscal Board Member and Senior Executive at Taxlibris during an IPBN webinar held at the end of May. Teixeira told the IPBN that giants of e-commerce like Amazon, Alibaba, and others are located in low tax rate territories like the US, China, and Ireland have made for unfair market competition with the EU and rampant tax fraud throughout the 27 member-states, especially in Southern Europe.
Ireland’s Minister of Finance Paschal Donohoe also joined the IPBN via zoom alongside H.E. Ralph Victory, The Ambassador of Ireland to Portugal, to answer questions from attendees on these new rules and more. During the webinar, the Minister explained that sales taxes like VAT are examples of taxes levied to fund national governments and the European Union, which are further important to fund the operation of single markets. “The VAT tax…lends itself to a degree of harmonization, because they’re really important to the operation of the single markets. Other taxes less easily lend themselves to that kind of change…The next thing you’ll see is to have a common form of taxation with regard to the use of plastics within the EU. But other taxes with regard to our social insurance system, with regard to our income tax system, with regard to how we tax businesses, are probably less likely to be quickly harmonized.”
Since Saturday’s meeting, Donohoe told Reuters that he remained confident that Ireland’s low-tax economy would continue to attract multinational investment and jobs even in light of the new tax rules but warned that Ireland could lose up to a fifth of its corporate tax revenue under the G7 finance ministers’ proposal.
Since Saturday's 15% agreement, Donohoe in his capacity as President of Eurozone noted that large companies like Apple have been in Ireland for decades enjoying the former 12.5% tax rate to foreign multinationals, and are in effect, one of its largest employers. However, he told the Irish Times that he was positive about Ireland’s future despite the change, pointing to the fact that the country intends to remain clear and predictable about its response to changes in taxation, a fact that has prolonged the companies’ initial investments.
Big multinationals such as Apple, Facebook, and Google directly employ around one in eight workers in Ireland and account for over 80% of corporation tax receipts that have boomed in recent years, Reuters reported. He stressed that Ireland's annual corporate tax take is set to be around 20%, which is a €2 billion a year loss comprising a fifth of the State’s annual corporate tax revenue. On the upside, Donohoe noted that the loss has already been built into the Government’s economic assumptions.
“The proposals have to be approved by the Organisation for Economic Co-operation and Development (OECD) in the coming months, before coming into effect. Donohoe said he would continue to argue for Ireland’s 12.5 percent corporate tax rate in negotiations with EU member states and the U.S.A..” the Irish Times reports.