A huge shift in its policy was made by Ireland as it agreed to become part of the global deal that will raise its corporate tax rate to 15 per cent.
Aimed at tackling tax evasion and synchronizing rules across the globe, countries in the G-7 and G-20 groups of nations decided to get together to adopt a common taxation system earlier this summer. Under this new system, multinationals would be forced to pay tax where they operate and not only in the country where their headquarters are situated, along with a minimum corporate tax rate of 15 per cent.
With a maximum corporate tax rate of 12.5 per cent, the Republic of Ireland is amongst the most lucrative destinations for multinationals in the world and a large number of global companies had their European headquarters there. This prompted Ireland to initially not join the plan. the low rate of corporate tax had been vehemently supported by different Irish governments and argued that the low rate was a tool for the small country to attract businesses.
According to reports on earlier this summer on Thursday evening, a proposal for an enhancement in corporation tax from 12.5 per cent to 15 per cent for multinationals that have turnover of more than 750 million euros was approved by the country’s Cabinet.
Ireland’s Finance Minister, Paschal Donohoe later confirmed the news.
“In joining this agreement, we must remember that there are 140 countries involved in this process and many have had to make compromises,” Donohoe said, according to RTE. “But I also believe that the agreement government has agreed to sign up to today is balanced and represents a fair compromise reflecting the interests and input of the many countries involved in the negotiations.”
According to RTE, the Irish Department of Finance estimates that joining this global agreement will reduce the country's tax revenue by 2 billion euros ($2.3 billion) per year. Furthermore, according to an opinion poll conducted for The Irish Times, the majority of Irish voters believe the government should not change its policy at this time.
Ireland, on the other hand, changed its mind after reading a revised text. The original agreement called for a minimum corporate tax rate of "at least 15 percent," but that figure has since been reduced to just 15 percent, indicating that the rate will not be raised at a later date. Ireland was also assured that the lower rate for small businesses based in the country would be maintained.
Péter Szijjártó, Hungary's minister of foreign affairs and trade, said in a television interview on Wednesday that initial talks mentioned a corporate tax rate of 21%, which is much higher than the country's current rate of 9%. As a result, he believes the new level of 15% is somewhere in the middle.
The global tax agreement has yet to be approved by Hungary. Budapest, on the other hand, would be more eager to join if a 10-year implementation period could be agreed upon, according to the minister.
Meanwhile, France's finance minister, Bruno Le Maire, a vocal supporter of the global tax deal, said on Wednesday that an agreement was "one millimeter away."
“The key point is to have an agreement being adopted, no later than the end of this month, on the new international taxation system.,” he said in Paris.
“We could either next week during the Washington meetings, or at the G-20 meeting in Rome at the end of October, sign the final agreement under the international taxation system,” he added.
(Source:www.cnbc.com)
Aimed at tackling tax evasion and synchronizing rules across the globe, countries in the G-7 and G-20 groups of nations decided to get together to adopt a common taxation system earlier this summer. Under this new system, multinationals would be forced to pay tax where they operate and not only in the country where their headquarters are situated, along with a minimum corporate tax rate of 15 per cent.
With a maximum corporate tax rate of 12.5 per cent, the Republic of Ireland is amongst the most lucrative destinations for multinationals in the world and a large number of global companies had their European headquarters there. This prompted Ireland to initially not join the plan. the low rate of corporate tax had been vehemently supported by different Irish governments and argued that the low rate was a tool for the small country to attract businesses.
According to reports on earlier this summer on Thursday evening, a proposal for an enhancement in corporation tax from 12.5 per cent to 15 per cent for multinationals that have turnover of more than 750 million euros was approved by the country’s Cabinet.
Ireland’s Finance Minister, Paschal Donohoe later confirmed the news.
“In joining this agreement, we must remember that there are 140 countries involved in this process and many have had to make compromises,” Donohoe said, according to RTE. “But I also believe that the agreement government has agreed to sign up to today is balanced and represents a fair compromise reflecting the interests and input of the many countries involved in the negotiations.”
According to RTE, the Irish Department of Finance estimates that joining this global agreement will reduce the country's tax revenue by 2 billion euros ($2.3 billion) per year. Furthermore, according to an opinion poll conducted for The Irish Times, the majority of Irish voters believe the government should not change its policy at this time.
Ireland, on the other hand, changed its mind after reading a revised text. The original agreement called for a minimum corporate tax rate of "at least 15 percent," but that figure has since been reduced to just 15 percent, indicating that the rate will not be raised at a later date. Ireland was also assured that the lower rate for small businesses based in the country would be maintained.
Péter Szijjártó, Hungary's minister of foreign affairs and trade, said in a television interview on Wednesday that initial talks mentioned a corporate tax rate of 21%, which is much higher than the country's current rate of 9%. As a result, he believes the new level of 15% is somewhere in the middle.
The global tax agreement has yet to be approved by Hungary. Budapest, on the other hand, would be more eager to join if a 10-year implementation period could be agreed upon, according to the minister.
Meanwhile, France's finance minister, Bruno Le Maire, a vocal supporter of the global tax deal, said on Wednesday that an agreement was "one millimeter away."
“The key point is to have an agreement being adopted, no later than the end of this month, on the new international taxation system.,” he said in Paris.
“We could either next week during the Washington meetings, or at the G-20 meeting in Rome at the end of October, sign the final agreement under the international taxation system,” he added.
(Source:www.cnbc.com)
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