DUBLIN – Ireland say they will ‘push back’ on global demands to raise weak title corporate tax rate that has helped lure hundreds of American businesses to the Emerald Isle, even though some opposition lawmakers suggest the country is swimming against the tide.
“We are standing above our 12.5 percent corporate tax rate, ”Deputy Prime Minister Leo Varadkar told reporters in Dublin.
For decades, Ireland has fended off demands from EU heavyweights, Germany and France, to increase its rate. They argue that the Irish are unfairly poaching investment from US companies that might otherwise go to them, where interest rates are closer to 30%.
“It’s an integral part of our business model. Ireland levies twice as much per capita in corporate income tax compared to other countries. This is a very good example of how low taxes can actually lead to higher incomes, ”said Varadkar, who is also Irish Minister for Trade. “We’re going to push back very hard on anything that could compromise that. “
The past quarter century has coincided with the attraction of more than 1,000 multinationals to Ireland’s shores, including many of America’s largest social media, tech, pharmaceuticals and medical device companies. Ireland now derives one-fifth of its tax revenues, one-third of its workforce and half of its income taxes from foreign multinationals.
As a direct consequence, and unlike the rest of the EU, the Irish economy, which is highly exporting, has continued to expand throughout the pandemic.
As the fight against the coronavirus inflates countries’ deficit spending, growing US criticism of low-tax jurisdictions like Ireland has reached a potential tipping point.
Write in the Washington post, U.S. Treasury Secretary Janet Yellen and finance ministers from Germany, Indonesia, Mexico and South Africa argued that low-tax jurisdictions rob other economies of much-needed income so that all nations fight a global pandemic.
“Corporate capital income too often ends up in low-tax jurisdictions as the world’s most profitable companies deftly reduce their tax burden,” wrote Yellen and the finance ministers. “Beyond the loss of revenue, governments live in fear of overtaxing companies, lest these companies move their operations – and their jobs – overseas. The momentum that has developed over the past half century is, in the classic economic sense, a race to the bottom when it comes to corporate tax rates.
Their op-ed did not target Ireland, where Finance Minister Paschal Donohoe dismisses claims Ireland is leading a ‘race to the bottom’ – because the Irish offered this world-beating fund for decades. Ireland only charged a global rate of 10 percent, but gradually increased it to 12.5 percent from 1996 to 2003.
The potential for a globally agreed minimum effective rate of 15%, endorsed by the G7 group of rich countries, is fueling speculation here that Ireland could be forced, or willingly agree, to apply the hike. at its own rate.
But Varadkar rejected a Financial Times Report suggesting that the idea was gaining ground in Ireland. He noted that the article cited two opposition lawmakers who would endlessly snip the government.
He said Donohoe, who is also president of the 19-country Eurogroup, would rally support from other smaller countries who want to retain the investment benefits of recruiting. “We’re going to be inside the tent,” Varadkar said, “but our firm position is that the 12.5% remain.”
One of the opposition lawmakers cited by the FT as questioning this position, Labor Party finance spokesman Ged Nash accused the government of fighting against a wind of global change. Labor currently only holds seven seats out of the 158 members of the Irish parliament.
“No wishful thinking will change the fact that the G7 agreed this weekend on a global minimum tax rate of at least 15% for large corporations. If that goes into effect, many multinationals based in Ireland will pay that tax rate, either to the IRS in the United States or to Revenue here, ”Nash said.
Varadkar, he said, “can’t put his head in the sand and pretend he isn’t. It’s a declared priority of Joe Biden’s presidency.