Ireland could lose up to a fifth of its corporate tax revenue under a proposal approved by G7 finance ministers on Saturday, Finance Minister Paschal Donohoe warned.

But he said such a loss of revenue, of around € 2 billion a year, was already built into the government’s economic assumptions.

The probable loss to the public treasury of € 2 billion to € 2.4 billion is equivalent to almost a fifth of the state’s annual corporate tax revenue.

It represents about two-thirds of the total housing budget for that year or about a quarter of the annual education budget.

Finance ministers from the Group of Seven major industrialized countries meeting in London said they would support a minimum global corporate tax rate of at least 15% and put in place measures to ensure that taxes are paid in countries where companies operate.

Mr Donohoe, who was present at the meeting as chairman of the Eurogroup of euro area finance ministers, said his officials had already modeled the impact of the proposals for Ireland.

“This indicates that Ireland could lose up to a fifth of our overall corporate tax revenue and that the potential loss of revenue is already being used in our medium-term budget calculations,” he told the Irish Times .

The proposals must be approved by the Organization for Economic Co-operation and Development (OECD) in the coming months before entering into force. Mr Donohoe said he would continue to advocate for Ireland’s 12.5% ​​corporate tax rate in negotiations with EU member states and the United States, which he met on Saturday. Secretary of the Treasury Janet Yellen.

“In the bilateral engagement I had with the OECD and with the Secretary [Janet] Yellen I continued to advocate for legitimate tax competition within limits and for the role of small and medium-sized economies in the upcoming deal. And I will continue to defend this cause, ”he said.

it’s yet to come. And I will continue to defend this cause, ”he said.

The multinationals

Mr Donohoe said he was convinced multinational companies would stay in Ireland despite any change in the tax rate. And he noted that there had already been new foreign direct investment (FDI) in Ireland this year despite the coronavirus pandemic.

“The tax environment that is developing at the moment is also the one that multinationals are evaluating at the moment. The reason I am very optimistic about the future of our country and our economy is twofold.

It is first and foremost the longevity of the investment we have in Ireland. A large part of the FDI investments in Ireland that we refer to are investments that have now been in Ireland for many decades. It is well anchored in the physical infrastructure of our country, ”he said.

“Those who are responsible for this FDI, those responsible for leading it and indeed those responsible for domestic investment in our country have always seen the transparency of this Irish government and previous ones and they have seen our efforts to long time to be predictable. and be clear on how we will respond to change.

G7 ministers said the tax should be applied at the country-by-country level, to prevent multinationals from shifting profits between countries in order to lower their tax bill.

OECD

Talks at the OECD have been going on for some time in an attempt to reach agreement on global tax reform.

The G7 deal will now be discussed at a G20 meeting in Venice in July, hoping to agree on the details by the fall.

“The chances of a global deal have increased considerably,” said EU Economic Commissioner Paolo Gentiloni after the G7 deal was announced in London.

He added that a global deal could now be reached in July and that the next step would be to win the support of the wider G20 and other countries involved in the OECD tax negotiations.

“Today in London we took a big step towards an unprecedented global agreement on corporate tax reform,” he said.

Agreement

This means that G7 ministers are backing the two main arms – or pillars – of the OECD negotiations, making a deal look likely over the summer, although many important details have yet to be agreed.

Ministers also agreed that companies should report their environmental impact in a more standard way so that investors can more easily decide to finance them.

Rich countries have struggled for years to find a way to generate more income from large multinationals such as Google, Amazon and Facebook, which often make profits in jurisdictions where they pay little or no tax.

The administration of US President Joe Biden has given new impetus to the stalled talks by proposing a minimum global corporate tax rate of 15%, higher than the level of countries like Ireland but lower than the lowest level in the G7. – Additional Reuters reporting

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