Ireland: International tax reform is imminent

Dublin / Paris (dpa) – After the previous low-tax country Ireland gave in, an important hurdle for a global reform of corporate taxes was cleared this year.

The Organization for Economic Cooperation and Development (OECD) wanted to end the technical talks at a meeting in Paris on Friday, as the “Financial Times” reported. Ireland had previously bowed to international pressure – and Estonia was another EU country. The cabinet in Dublin decided on Thursday evening to increase the tax rate for companies with a turnover of more than 750 million euros from 12, 5 to 15 percent.

Ireland, where large digital corporations have their European headquarters, is contributing to the targeted global tax reform and avoiding further disputes with the G 20 – Group of the top economic powers. So far, Dublin has always defended its low tax policy, which is an important business model. However, the pressure increased after the finance ministers of the leading industrialized and emerging countries (G 20) agreed in the summer on a reform of the international tax rules in the digital age.

The G 20 – Finance Ministers decided in July on two innovations: Internationally active companies should, regardless of their seat, “at least” 15 Pay percent tax. If a company with its subsidiary pays less taxes abroad, the home country can collect the difference. This is to prevent profits from being shifted to tax havens. In addition, large companies should no longer be taxed only in their home country, but also where they do good business.

Dublin’s commitment was brokered by the OECD. Irish Finance Minister Paschal Donohoe said it was a far-reaching reform of the global tax framework. «It is the right decision. It’s a sensitive and pragmatic decision. ” Deputy Prime Minister Leo Varadkar told RTÉ that the government had been assured that it was a step that would occur “once in a generation” and that the tax rate would not rise any further. Varadkar emphasized that the corporate tax was “exactly” 15 percent and not – as initially requested – “at least” 15 percent . As a result, the government had come to the conclusion that it would be better for Ireland to participate.

In the EU country, dozens of companies with hundreds of thousands of employees are affected by the change, which presumably 2023 will come into force. The government in Dublin estimates its losses due to the tax increase at 800 million to 2 billion euros per year. In addition to Ireland, Estonia and Hungary from the EU had so far resisted the reform.

As Estonian Prime Minister Kaja Kallas announced on Thursday evening, the Baltic country is now also giving up its resistance. “We have held intensive negotiations all summer in order to achieve a situation in which Estonian entrepreneurs are affected as little as possible by this global tax,” said Kallas. The minimum tax will not change anything for most Estonian companies and will only affect subsidiaries of large multinational corporations. By participating in the tax reform, Estonia has the opportunity to work towards ensuring that “the business environment and the tax policy of Estonia continue to function in the interests of a better future for all of us.”

US Treasury Secretary Janet Yellen had on On Wednesday, in a conversation with her Estonian counterpart Keit Pentus-Rosimannus, she once again insisted on reforming the global tax system. A consensus on the global minimum tax has “top priority”, said Yellen.

The industrialized countries organization OECD has so far calculated 150 billion dollars (about 130 billion euros) additional tax revenue worldwide. The redistribution could bring the so-called market states again more than 100 billion dollars. There is no reliable information on the effects on the tax authorities in Germany. Almost all OECD countries had already given their approval at working level, including well-known tax havens such as the Cayman Islands.

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