Paschal Donohoe refuses to rule out change in 12.5% corporation tax rate

Finance Minister Paschal Donohoe has repeatedly refused to rule out a change in Ireland’s corporation tax rate.

The Irish Examiner reported this morning that Ireland is set to abandon its long-held 12.5% corporation tax rate, according to several senior Government sources.

While no formal Government decision has yet been made, several Government sources have told the Irish Examiner it is the expectation that the tax incentive for large multinationals is set to be relinquished as part of a new OECD tax agreement in October.

Earlier this month, the G7 and OECD countries reached an agreement, though not unanimous consensus, on key aspects of a global tax deal which seeks to introduce a minimum rate of 15%.

Mr Donohoe did not deny Irish Examiner report this morning during media interviews and an Oireachtas committee hearing, but repeatedly refused to commit to keeping the current rate.

At the budgetary oversight committee, Mr Donohoe said he was “providing a robust defence of our position” when questioned on current negotiations by Sinn Féin’s Pearse Doherty, who repeatedly asked Mr Donohoe to commit to the current rate and said that Ireland risked reputational damage by his failure to get other states to be persuaded by Ireland’s argument.

“My commitment to our rate is attested by not being part of the consensus at the moment, proof of my commitment is looking to do what is necessary to protect it in the future,” he said.

“Beyond words, actions of where I stand, and willingness to stand outside consenses makes clear to my commitment to where we are.

“I’m involved in a negotiation at the moment and I’ve proven that I’m standing by our rate and we’re not in agreement at the moment and in a minority of countries.

“I’m not going to speculate on an agreement that is not yet finalised.

“I’ve been dealing with and explaining different challenges that we face at different points in time and that continues to be the case,” Mr Donohoe said.

“I think when we’re in those challenges, what is appropriate and necessary, if we make the case for what we have, we negotiate in our national interest, we explain what is happening and, as opposed to me predicting hypothetical outcomes and what I might do at that point, given that this is a negotiation I pursue what I believe.”

Mr Donohoe also said on radio this morning: “What is on the table at the moment is an agreement that Ireland cannot be part of.” 

He said during the committee that “the agreement on the table doesn’t provide certainty either”, pointing out that the agreement on taxable base refers to “at least” 15%. 

“I will seek to protect our rate and bring as much certainty to where Ireland stands — to suggest it is a source of stability is plain wrong.”

Mr Donohoe said if an agreement on the 15% rate can be reached, then he would recommend a change to the Government.

“It is as something that I’m open to, because I’m involved in a negotiation, and in any negotiation, particularly, for example, involving such friends and partners such as the United States of America. I do think it’s important not to rule anything out.

“I think it’s very reasonable for me to say that if there is an agreement that I believe is in our national interest to be part of, I would recommend that to the Government and what I’m doing is making the case for our 12.5% rate, and for the right with smaller and medium-sized economies to have a low rate as part of their competitiveness.”

During the committee meeting, People Before Profit TD Richard Boyd Barrett pointed out the average worker pays more in tax than the wealthiest corporation tax in Ireland, calling the stance “indefensible”.

“When 130 countries around the world finally have the courage to begin to address this obscenity of wealthy corporations playing negotiable amounts of tax coming together, to agree 15% minimum corporate tax rate, you hold out against that, defending this indefensible position. Doesn’t that confirm we’re a tax haven?”

Mr Donohoe said that according to the Revenue Commissioners, the effective tax rate was 10%-12% and the difference is “negligible”.

Mr Boyd Barrett said the suggestion the rate is anywhere close to 12.5% is “absolutely preposterous” due to the amount of relief given and other expenses not being taxed and “the real rate is 4.5%.”

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