The way is now clear for Ireland to sign the OECD tax deal
And so the crackle came. It looks like Cabinet will be asked on Thursday to give the green light to removing the 12.5% corporate tax rate and replacing it with a 15% rate.
This follows the latest draft texts of the Organization for Economic Co-operation and Development (OECD) agreement which abandoned the formulation that the new rate should be “at least 15 per cent” and have it. replaced by what appears clearly commitment at a rate of 15 percent.
The exact wording of the final text remains in play.
Uncertainty about the future rate was the main reason Ireland did not sign the OECD draft text in July, fearing the rate would drift higher. Finance Minister Paschal Donohoe argued that small countries like Ireland should be allowed to compete on the basis of low tax rates in the future.
Removing the phrase “at least” is therefore a victory from the Irish point of view and is likely to see Cabinet signing the deal.
It may not be the end of the battles, however. If an OECD deal is reached, the next key point for Ireland is that the EU has just drawn up a directive to implement it next year.
Donohoe will likely see what assurances he can get from the European Commission that he won’t push for a rate above 15 percent in the EU.
Ireland will also ask the committee and the OECD to approve the retention of the current rate of 12.5% for companies with turnover below the limit of 750 million euros mentioned in the text. of the OECD.
The final key uncertainty for Ireland then is what happens in the United States, where Congress is trying to agree on a major economic and tax package that includes new rules to tax corporate overseas profits. American.
This could pose a greater danger to Ireland than the OECD deal, according to Peter Vale, tax director at Grant Thornton, especially if the United States opts for a significantly higher rate than the OECD.
The OECD agreement is not concluded. A number of countries that signed the original draft deal are threatening to withdraw, and some developing countries claim they are not getting a fair deal.
The part of the deal that reallocates taxing rights remains controversial – and the outcome here remains important for the Irish chess board, which could lose up to € 2.5 billion a year.
Donohoe has already pointed out that this is a significant cost to Ireland, but he still believes the certainty of a deal is to Ireland’s advantage. The country has also implemented important legislation in line with the previous OECD agreement on profit shifting.
If the OECD deal collapses, provided Ireland agrees, it will be due to objections elsewhere.
For now, an OECD deal seems more likely on Friday or later in October, although uncertainty over what happens in Washington remains.
This one won’t be finished until it is completed, but the crucial decision on the 12.5 percent rate is expected to come on Thursday.