Low-rate Ireland accepts global tax deal

·2-min read

Ireland has dropped its opposition to an overhaul of global tax rules, agreeing to give up its prized 12.5 per cent rate for large multinationals in a major boost to efforts to impose a minimum levy worldwide.

Ireland, the low-tax European headquarters for blue chip companies including Apple, Google and Facebook, declined to sign up to the initial deal in July, objecting to a proposed rate of 'at least' 15 per cent.

An update this week dropped the 'at least', clearing the way for ministers to do what successive governments said they would never contemplate - giving up the low rate that has helped win Ireland investment and jobs for decades.

"Joining this agreement is an important decision for the next stage of Ireland's industrial policy - a decision that will ensure that Ireland is part of the solution," Finance Minister Paschal Donohoe told a news conference.

"This is a difficult and complex decision but I believe it is the right one."

All bar a handful of the 140 countries involved signed up to the July deal, brokered by the Organisation for Economic Co-operation and Development (OECD), that marked the first rewriting of international tax rules in a generation.

The holdouts, which include fellow EU members Estonia and Hungary, cannot block the proposed changes. The 140 negotiating countries are due to meet on Friday to finalise the deal.

The US Treasury, which had pressed Ireland to support the global minimum tax, hailed Dublin's decision as putting the world on a path toward a "generational achievement" to ensure corporations pay their fair share of taxes.

If Ireland had maintained its lower rate, multinationals that book profits there could be forced to pay the additional tax elsewhere under the proposals.

The government said it had received assurances from the European Commission that Ireland can maintain the 12.5 per cent rate for firms with annual turnover below 750 million euros ($A1.2 billion) and keep tax incentives for research and development.

The Commission promised it will stick faithfully to the OECD agreement and not seek a higher rate among member states, Donohoe said.

Many analysts expect Ireland to remain competitive in the battle to attract foreign direct investment.

Some 1500 multinationals that will be hit by the higher rate currently employ around 400,000 people - or one in six workers - in Ireland, Donohoe said.

"We would be reasonably confident that this won't have a substantial impact," said Kieran McQuinn, research professor at the Economic and Social Research Institute think-tank.

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