Ireland has agreed to sign a proposed agreement for a global minimum tax on companies, removing a key hurdle to an unprecedented deal that would reshape the landscape for multinational corporations.
Ahead of a meeting between 140 countries hosted by the Organization for Economic Cooperation and Development (OECD), the Irish government said it will join the push for a 15% tax to be levied on profits of corporate entities.
That 15% rate is 2.5 percentage points higher than the longstanding corporate tax rate of 12.5% that has been a pillar of Ireland’s economic model for a generation, underscoring its symbolic significance for a nation whose prosperity is linked to its attractiveness for multinationals seeking to operate in the European Union.
French Finance Minister Bruno Le Maire has said that compromise must be achieved this month on the basis that "it is now or never" for achieving a global minimum tax rate on corporations. His concern is that without a final agreement at a Group of 20 summit scheduled for later this month, a historic window of opportunity to end years of negotiation will close.
Ireland’s 12.5% corporate tax rate, which it has held onto since 2003, is well below the average of about 23% among other OECD nations. That’s helped persuade international companies such as Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) to use Ireland as a base for their European headquarters.
Ireland’s finance ministry estimates it will lose up to two billion euros ($2.3 billion U.S.) in corporation tax as a result of the proposed reforms. Even so, it has argued that its 12.5% rate is only one factor in attracting foreign companies to the country.
