Global Tax Talks Race Against Clock as Irish Shift Wins Applause
(Bloomberg) -- Global talks to reshape the corporate tax landscape are set to resume on Friday after Ireland’s decision to adhere to the world consensus on a minimum rate removed one hurdle to an agreement that still hangs in the balance.
The Irish shift is one of several needed from among the 140 countries negotiating a wide-ranging deal in talks hosted by the Organization for Economic Cooperation and Development.
Some nations are seeking so called carve-outs to partially exempt certain activities from a minimum tax rate of 15%, while others are haggling over a separate part of the accord concerning where profits of big firms are levied.
The talks are the culmination of years of negotiation that took on new momentum with the advent of President Joe Biden’s administration in the U.S.
French Finance Minister Bruno Le Maire said this week that a deal must be achieved soon, on the basis that “it is now or never.” His concern is that without final agreement at a Group of 20 summit later this month, a historic window of opportunity will close as chances of U.S. Congressional approval quickly fade thereafter.
On the eve of Friday’s key gathering, the Irish cabinet agreed to join the push for a 15% minimum levied on profits of corporate entities. The U.S. views that move as enormous progress, a Treasury official said, noting that 15% would be a floor, not a ceiling, for company taxes around the world. The goal is to finalize a deal by the G-20 leaders’ summit, the official said.
“This agreement is a balance between our tax competitiveness and our broader place in the world,” Irish Finance Minister Paschal Donohoe said Thursday evening. The decision “will ensure that Ireland is part of the solution in respect to the future international tax framework.”
The minimum rate is 2.5 percentage points higher than the longstanding level that has been a pillar of the Irish economic model for a generation, underscoring its huge symbolic significance for a nation whose prosperity is linked to its attractiveness for multinationals seeking an operating base in the European Union.
While the financial implications of Ireland’s shift may never be realized if the deal isn’t finalized, the importance of the existing 12.5% rate in the national consciousness was the reason a country normally aligned with international consensus held out for so long.
‘At Least 15%’
The Irish government took particular exception to wording in a July draft of the accord that called for a minimum rate of “at least 15%,” a proposal which it didn’t accept due to concerns that the final number could end up significantly higher.
Donohoe repeatedly expressed concern on the “at least” language, which has been dropped from the revised draft and stressed the need for certainty.
“We have secured the removal of ‘at least’ in the OECD text as we had sought,” Donohoe said. “Some countries wanted higher minimum tax rates and I believe our position moderated those ambitions in the context of broader consensus and agreement.
Ireland’s 12.5% rate, which it has held onto since 2003, is well below the average of about 23% throughout the OECD. That’s helped persuade international companies such as Alphabet Inc.’s Google and Facebook Inc. to use it as a base for their European headquarters.
Ireland’s finance ministry estimates it will lose up to 2 billion euros ($2.3 billion) in corporation tax as a result of reforms.
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