Ireland’s 12.5% corporate tax rate is to be increased to 15%, finance minister Paschal Donohoe has confirmed.
He made the announcement following a Cabinet meeting on Thursday, where it was agreed the new tax rate would apply to companies with turnover in excess of 750 million euro.
This will affect 56 Irish multinational companies employing 100,000 people. It will also affect 1,500 foreign-owned multinationals employing 400,000 people.
Ireland has come under increasing pressure to sign up to the Organisation for Economic Co-operation and Development (OECD) deal on global tax reform.
The agreement provides that the minimum effective rate for multinationals with an annual revenue in excess of 750 euro million is 15%
The Finance Minister said he had sought changes to the deal to secure “certainty and stability”.
He added: “I believe we have now reached that point. This is the right decision. It is a sensible and pragmatic decision.
“The Government has given approval for Ireland to sign up to the political agreement at the OECD Inclusive Framework on a new tax framework to address the tax challenges of digitalisation.
“The agreement provides that the minimum effective rate for multinationals with an annual revenue in excess of 750 euro million is 15%.
“We have secured the removal of ‘at least’ in the text.
“This will provide the critical certainty for Government and industry, and will provide the long-term stability and certainty to business in the context of investment decisions.
For over 160,000 businesses in Ireland with a turnover less than 750 million euro per annum, who employ approximately 1.8 million people, there will be no change to their corporation tax rate of 12.5%
“This 15% rate will apply to 56 Irish multinationals employing approximately 100,000 people and 1,500 foreign-owned MNEs based in Ireland employing approximately 400,000 people.”
Mr Donohoe added: “Furthermore, the vast majority of businesses in Ireland will be outside the scope of this agreement and there will be no change to their corporation tax rate. This is important for the domestic economy and the thousands of SMEs that operate here.
“For over 160,000 businesses in Ireland with a turnover less than 750 million euro per annum, who employ approximately 1.8 million people, there will be no change to their corporation tax rate of 12.5%.”
“We have seen over the last two years the benefits of innovation – critically in respect to the vaccines which are allowing society now to reopen, but also the role that technology played in keeping businesses open.
“Innovation matters and it is right that the tax system can support this. I am pleased that it has been recognised and delivered in the agreement.”
Earlier, the Tanaiste said Ireland will be able to operate two tax rates if it agrees to sign up to the OECD deal on a global minimum corporate tax rate.
“The minister informed me today that we have received that assurance, that we can do that.”
Mr Varadkar said existing estimates show Ireland could lose two billion euro a year in revenue from the change in corporate tax.
“That is only an estimate,” he said. “It’s based on certain assumptions which may or may not be correct.
“Our 12.5% has been a huge success and is a really important part of our industrial policy.
“Over a quarter-of-a-million people work in multi-national companies in Ireland, we want to keep those jobs and the 100,000 or so indirect jobs that arise from those jobs.
“We take in about 12 billion euros a year in corporate profit tax, that is roughly double what the average European country does on a per head basis.
“Our concerns relate to the issue of being ‘at least’, and we want to make sure that whatever rate is agreed is certain.
“We want to make sure that countries that sign up to this actually implement it, and we don’t want to find ourselves implementing it and our competitors do not because that would be a disadvantage to us.”