The Government has agreed to sign up to an international tax agreement at the Organisation for Economic Co-operation and Development (OECD).
Ireland had held out on signing up to the interim agreement in July, mainly due to a proposal for a minimum effective tax rate of “at least 15%”.
Minister for Finance Paschal Donohoe (pictured) said that Ireland had sought, and had now secured, the removal of the ‘at least’ reference from the OECD text.
“Some countries wanted higher minimum tax rates, and I believe our position moderated those ambitions in the context of broader consensus and agreement,” he said, adding that this change provided “critical certainty for Government and industry”.
Smaller firms stay on lower rate
The new rate will affect 56 Irish multi-national companies that employ around 100,000 workers, and 1,500 foreign-owned firms employing around 400,000 people.
The minister also said that the EU Commission had assured him that a directive transposing the OECD agreement would not go beyond the international consensus.
The 12.5% corporation tax rate will remain for businesses with annual revenues of less than €750 million.
“I am happy to confirm that I have received assurances from the EU Commission that maintaining the headline 12.5% corporation tax rate for businesses out of scope of the OECD agreement does not present any difficulties,” minister Donohoe said.
The Department of Finance and Revenue have estimated that the cost of the agreement will be up to €2 billion a year, when it comes fully into effect.
“While this is a significant cost to the Exchequer, I believe that staying outside such an international agreement would have had a far higher cost in terms of our international reputation,” the minister said.