Finance | Extent to which revised proposals in corporation profits tax effect foreign direct investment

To ask the Minister for Finance if the revised proposals in respect of corporation profits tax are likely to have any negative effect on foreign direct investment here; and if he will make a statement on the matter.

REPLY

I understand that the revised proposals in respect of Corporation tax profits which the Deputy is referring to in his question relate to the projected cost of joining the agreement by the OECD/G20 Inclusive Framework on BEPS last October through a two-pillared solution to address tax challenges arising from the digitalisation of the economy.

Pillar One will see a reallocation of 25% of residual profits to the jurisdiction of the consumer. The scope is confined to multinational groups with turnover in excess of €20 billion annually. Residual profit is profit greater than 10% of turnover.

Pillar Two provides that the minimum effective rate is 15% for multinational enterprises with annual turnover in excess of €750m.

It is expected that the Agreement will bring long-term stability and certainty to the international tax framework arising from discussions which have taken place.

Importantly for Ireland, the agreement provides that the minimum effective rate for those companies in the scope of the agreement will be 15%, and this will provide the critical certainty for Government and business alike.  At the same time we protected the 12½% rate for out of scope business which will continue to be an important part of our offering in the future.

The agreement will also continue to support innovation and growth, acknowledging as it does the need for innovation incentives such as for research and development.

This is a global agreement, and will ultimately underpin the required certainty and stability in the international tax framework, important to both business and government alike, when it comes to making future investment decisions.

I have long held that there will be a price to pay but it is a price that is worth paying to reduce the risk of disputes and escalating trade tensions. Instead this agreement will achieve greater tax certainty and the removal of unilateral measures such as digital services taxes.

Ireland’s economic success is not simply an accident of history. It has been achieved by identifying our strengths and developing a strong offering that meets the needs of modern business. While Ireland is not blessed with abundant natural resources, we have invested in education so that we have our own resource – a highly educated workforce whose skills meet the needs of modern enterprises.

Ireland’s place in the world is that of a business friendly country, deeply integrated with the global economy, and an ideal location for companies looking to access the EU, the world’s largest consumer market. The historic agreement achieved at the OECD last October, will provide a platform for Ireland’s continued competitiveness and attractiveness for Foreign Direct Investment.