Ireland’s second largest opposition party has backed a “slight increase” in the country’s corporate tax rate, a sign that Dublin’s longstanding political consensus on multinational corporations is fracturing after the Group of Seven agreed a plan global tax reform.
Ireland’s prime tax rate of 12.5 per cent has been pivotal to its success in attracting multinationals for many years. But Dublin now faces a major challenge after the Group of Seven major nations passed this weekend a global minimum tax of 15 per cent.
Jed Nash, the Irish Labor Party’s financial spokesman, told the Financial Times he was calling for a “national conversation” about the potential increase.
“Slight increase [in Ireland’s corporate tax rate] “I think we can live with it,” Nash said. He added that although we are “nowhere near that” because the OECD has not agreed on a global deal yet “the first thing we have to do is start building a political consensus here in Ireland”.
Nash said he would raise the issue with Irish Finance Minister Pascal Donohoe in Parliament next week.
“The minister should stand before Parliament on the options available to Ireland,” Nash said. He added that the opposition should be given enough information to weigh the pros and cons of increasing Ireland’s corporate rate to the global minimum or defend the current tax that all political parties have long supported.
If global agreement is reached for a higher rate than Ireland’s current tax and Dublin chooses not to implement it, then other countries can recover the remaining tax revenue, according to the plan under discussion. Some observers warned that this would be politically unpalatable in Ireland.
Ireland collects approximately €12 billion annually in corporate tax, out of a total tax of around €57 billion. at Report The Dublin Institute for Economic and Social Research, published last month, warned that higher tax rates could hurt Ireland’s small and medium-sized businesses, which employ about two-thirds of workers in the country.
“The tax rate of 12.5 per cent has become almost an article of faith in Irish politics,” said Gary Murphy, chair of Dublin City University’s School of Law and Government. Even Sinn Féin — the opposition’s largest and most left-wing party — was cautious about raising it, he said.
But on Tuesday, Piers Doherty, Sinn Fein’s financial spokesman, told the Financial Times that while he was “not in favor” of an increase in Ireland’s tax rate, he had asked the Treasury to do a detailed analysis on whether it would be “beneficial” for Ireland to adopt a rate 15 per cent for multinational companies only and whether this measure is feasible.
Also wanting to see simulations of increasing the corporate tax rate “across the board” and keeping it at 12.5 percent, he said, “We need to delve into this.” [international negotiation] With our eyes open.”
Speaking after Saturday’s G7 meeting, Donohue told reporters he would continue to “advocate the cause of legitimate tax competition.”
An Irish government official told the Financial Times that while Dublin wanted to defend the 12.5 per cent, it could be “difficult for Ireland to resist” raising it if the US followed the global minimum of 15 per cent.
Ireland’s Finance Ministry estimates Dublin could lose €2 billion a year from corporate tax reform, although Donohue stressed on Saturday that the potential cost was already included in Ireland’s economic outlook. The department declined to comment other than referring to the minister’s statement.
Talks between the 139 countries of the Organization for Economic Cooperation and Development are continuing in Paris with the aim of reaching an agreement later this year.