What does the Irish tax deal mean for multinationals?

Ireland has dropped its low-tax policy after months of wrangling over the fine print of an Organisation for Economic Co-operation and Development (OECD) agreement to operate a 15% minimum tax rate in more than 130 国.

Why was アイルランド key to a deal on taxing multinationals?

Some of the world’s biggest multinationals have their European headquarters in Ireland, having been lured there in part by its low corporation tax rate of 12.5%. The global average is 23.85%.

The UK and EU states, which operate higher rates, saw Ireland as having an unfair competitive advantage and have been pressuring it for years to fall into line.

Initially Ireland declined to sign up to the Organisation for Economic Co-operation and Development (OECD) 15% global tax pledge, which was agreed in July, on the grounds that it needed assurances that the deal would not be the gateway to even higher rates.

What multinationals are in Ireland?

Nearly all the household names in the social media sector have their European headquarters in Dublin, including Facebook, グーグル, Yahoo, LinkedIn and TikTok, along with other big names in tech and pharmaceuticals such as Apple, Intel and Pfizer.

They employ about 200,000 people directly and nearly the same again indirectly. Between them they paid net corporation tax of €5.98bn in 2020, とともに 10 largest companies paying just over half of Ireland’s total corporate tax receipts.

Why are they based there?

There are multiple reasons why Ireland is attractive for international business, including English as the international language, an educated workforce, its GMT timezone, membership of the EU and favourable business conditions.

And the country has used low headline corporate tax rates for almost two decades to further coax businesses to locate operations on its shores.

しかしながら, tax experts believe the biggest advantage for global corporates to locate in Ireland was a tax loophole known as the “double Irish” that was removed after a global crackdown in 2015.

Will multinationals now leave Ireland?

The Irish government has estimated it could lose between €800m and €2bn a year in corporation tax revenue under the OECD reforms.

Analysts at the consultancy Oxford Economics said corporate tax receipts in Ireland are heavily concentrated, with the top 10 foreign-owned multinationals accounting for 56% of total corporate tax revenue in 2020.

Analysis by the Irish Fiscal Advisory Council highlights that if half of these firms were to relocate, Ireland’s debt ratio would be seven percentage points higher by 2025.

しかしながら, the Irish government says it does not expect a mass exodus of US firms out of Ireland.

The real blow for the US multinationals was the phasing out of tax avoidance schemes between 2015 そして 2020, and any companies that were going to leave would have left by now. None of the big tech companies have left so far.