Donohoe confirmed the corporation tax rise following a Cabinet meeting, where it was agreed the new tax rate would apply to companies with turnover in excess of €750m (£636m). This means that Ireland is now part of the global corporate tax plan which has been put forward by the OECD.
In a statement, Donohoe said: ‘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.’
Speaking to the cabinet, the finance minister stated that he sought changes to secure ‘certainty and stability’.
On Monday, Donohoe confirmed that he had received a new draft text of an agreement from the OECD, the international organisation that is coordinating the efforts to reform the way multinational companies are taxed around the world.
The updated draft of a global corporate tax rate dropped the ‘at least’ from a proposed minimum rate of ‘at least 15%’.
This cleared the major hurdle for Ireland, one of nine countries which had refused to sign up to the corporate tax agreement and had come under fierce pressure from the EU and the US to raise the country’s traditionally low rate of 12.5% corporation tax.
Ireland attracted an estimated 1,000 multinationals in the tech, finance, and pharmacy sectors on the back of its corporate tax policy, including Pfizer, Intel, Yahoo, LinkedIn, TikTok, Apple, IBM, and Twitter.
Donohoe said: ‘I am confident that Ireland will remain competitive into the future, and we will remain an attractive location and best in class when multinationals look to investment locations. Ireland provides a stable platform and a long proven track record of success for MNEs choosing to invest here.’
Outside the negotiations which have continued throughout the week, French politician Bruno Le Maire stated that there had been discussion with the Irish minister for finance Paschal Donohoe and that the ‘minimum taxation rate was no longer a significant sticking point’.
Le Maire stated that he ‘welcomed the evolution of the Irish position, in particular on Pillar 2’.
The decision comes after months of wrangling over the fine print of the OECD agreement to operate a 15% minimum tax rate in more than 130 countries. All of the G20 leading nations have backed the plan.
Once an agreement is reached then governments would be expected to bring the new rules onto their statute books next year so that they take effect in 2023.
