Donohoe insists Ireland is still ‘best in class’ for attracting foreign investment

Minister for Finance Paschal Donohoe has insisted Ireland will continue to be "best in class" at attracting jobs and investment from multinationals despite the decision to sign up to an agreement to set a minimum global corporation tax rate of 15 per cent for large companies.

Once the OECD deal is implemented, the long-standing 12.5 per cent rate that has been a cornerstone of efforts to bring jobs to Ireland will no longer be available as part of the sales pitch to major pharma and tech companies.

Announcing the Cabinet decision to sign up to the deal, Mr Donohoe promised that the Government would ensure Ireland remained competitive and retain an “attractive tax offering”.

He highlighted Ireland could still offer research and development tax credits and how other countries wouldn’t be able to “undercut” the minimum 15 per cent rate and many would set corporate tax at higher levels.

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Mr Donohoe declined to say if there would be specific tax measures to boost Ireland’s attractiveness for foreign multinationals in next week’s budget.

But he pointed to the Government’s National Development Plan and the intention to invest billions in infrastructure and education among measures that would help ensure foreign direct investment continues to come to Ireland.

Once finalised, the OECD deal involving some 140 countries is not expected to be implemented until 2023 and Ireland’s 12.5 per cent rate can remain in place in the interim.

The exchequer is set to lose an estimated €2 billion in tax receipts when the deal – which also includes changes in where multinational companies will pay portions of their taxes – comes into effect.

Once implemented, companies with a turnover of more than €750 million per annum will face the 15 per cent rate – with Mr Donohoe saying he expects this will be the effective rate they end up paying.

The increased rate will hit 56 Irish-owned multinationals with about 100,000 workers and 1,500 internationally owned corporations with about 400,000 employees here.

Smaller companies will remain on the 12.5 per cent rate after the OECD deal is implemented.

Pressure

Ireland had been among a handful of countries holding out on signing up to the deal and came under intense international pressure to join.

Mr Donohoe said the focus in recent weeks had been to “secure necessary changes” to provide “certainty and stability” and protect Ireland’s strategic interests.

He said the Cabinet had approved his recommendation to join the “international consensus” and insisted it was the “right decision”, that it was “sensible and pragmatic”, and had been “made in the interests of our country”.

Mr Donohoe outlined how Ireland was not prepared to sign up to the original version of the deal many countries agreed in July.

He said the critical issue was the minimum effective tax rate of at least 15 per cent and the “desire of some [other countries] to seek a higher rate...

“Importantly, we have secured the removal of ‘at least’ in the text as we have sought.”

He said not signing up would have brought reputational and economic risks.

Mr Donohoe signalled that he expected the long-standing pressure from other EU members for Ireland to raise its corporate tax rate to abate now that Ireland was in the OECD deal.

He said the focus would be on implementing the agreement adding: “That will consume all of the attention and energy of me and my peers and the international tax community for many, many years.”

Earlier, Conor O'Kelly, chief executive of the National Treasury Management Agency (NTMA) – the State body that manages the national debt – said changes to the corporate tax regime was the "number one concern" for international investors that lend Ireland money.

He told the Dáil's Public Accounts Committee (PAC) "they're watching developments very, very closely".

However, he said he would not “overstate the ultimate impact” of the change on attracting foreign direct investment jobs, saying Ireland was “a great place to do business and we know multinationals are here not just for tax reasons”.