Corporate tax: ‘Too many significant unknowns’ to strike a deal yet - Donohoe

The Government is unlikely to make any concessions on the State’s 12.5 per cent corporate tax rate until it knows the outcome of discussions at the Organisation for Economic Co-operation and Development (OECD) and events in the US Congress in the coming weeks.

While Taoiseach Micheál Martin and Tánaiste Leo Varadkar have signalled that the rate could potentially change in response to international pressure to make multinationals pay more tax, sources familiar with Government discussions say any decision will not be taken until external factors are clearer.

One source said Ireland would “play it along for a bit” and that it was “still early days”.

Speaking in the Dáil last night, Minister for Finance Paschal Donohoe said there was “a desire” to sign up for a deal, but there were “too many significant unknowns for now”.

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He suggested that the current text of the agreement, which requires a minimum corporate tax rate of “at least 15 per cent . . . does not give confidence and clarity”.

Mr Donohoe said that had Ireland signed up to the agreement, he would not be able to say with certainty what the State’s tax rate would be in the future.

Mood for change

However, the mood in Government for a potential change was illustrated yesterday when Mr Varadkar suggested that a new minimum corporate tax rate might apply only to big multinationals, and local companies may be able retain the 12.5 per cent rate.

“The discussions we are having internationally at the moment only relate to very large companies with a turnover of more than €750 million a year,” he said. “So any agreement we may or may not sign up to won’t impact the average Irish business, won’t impact even any large Irish business, or mid-caps. The 12.5 per cent rate will stay in place for them.”

He said any change would only apply to those “very large companies”.

“Bear in mind many countries will benefit from an agreement on international tax, Ireland as a country will lose revenues, so we have to protect our interests, and that’s what we’re going to do,” Mr Varadkar said.

Speaking during his trip to New York this week, Taoiseach Micheál Martin said he would not be making commitments to US companies “one way or the other” that Ireland will be keeping its 12.5 per cent corporate tax rate.

White flag

When asked by reporters on Tuesday if Ireland was waving the white flag on the 12.5 per cent rate, Mr Martin said he had observed the interpretations people had put on his comments and said: “The bottom line is this: we’re in an OECD process. And in the middle of our process, you engage in a constructive way.”

He said that has been his approach, adding: “We have not agreed. We’ve not joined the consensus so far.”

But some Government sources played down Mr Varadkar’s suggestion of differing rates for large and small companies. Asked about the matter, the Department of Finance would say only that negotiations were continuing.

While the new global deal will directly affect only big companies, having a separate rate for smaller companies would be likely to require European Union clearance . Sources believe that while it could emerge as an option if a deal done at OECD level, this would depend on how the talks progress .

Sources said that while the vast bulk of countries had signed up to the draft OECD deal, it remained unclear if a deal could progress if the terms were not approved by the US Congress.