Ireland joins OECD int'l tax agreement to address worldwide economy digitisation issues

The Irish government has decided to join an international tax agreement to modify the global tax regulations in order to discuss the difficulties posed by the worldwide economy's digitisation, as per a statement published by the Irish Department of Finance on Thursday. In the statement, Ireland Finance Minister Paschal Donohoe stated that the Irish government gave authorisation for Ireland to sign up for the political deal at the Organisation for Economic Co-operation and Development (OECD) Inclusive Framework in the fresh tax structure for addressing the tax difficulties of digitalisation.

The statement further reveals that the OECD deal is built on two pillars. One of the pillars will supervise the reallocation of the profit part to the consumer's jurisdiction, while the other will see the implementation of a new worldwide minimum effective tax rate for multinationals with international revenues above 750 million euros which is nearly 866 million US dollars. 

The statement also stated that the previous version of the deal's proposed minimum effective tax rate was 'at least 15%' which now has been changed to a precise rate of 15%. The Xinhua website reported, citing the local media sources, that Ireland declined to sign the deal during earlier discussions because it was concerned that ‘at least’ 15% might indicate a future tax increase'. Donohoe clarified that the word 'at least' has been removed from the text. This will further give the government and industry the crucial assurance they need, as well as long-term stability and predictability for business when making investment choices.  

Ireland conducted extensive discussion before approving int'l tax agreement

The statement also reads that the 15% of the corporation tax rate would be applied to 56 Irish multinationals, hiring approximately 100,000 people, as well as 1,500 foreign-owned multinational corporations hiring around 400,000 people, whilst corporation tax rate for the extensive majority of businesses in Ireland will continue to stay at 12.5%. According to the statement, Ireland has over 1,60,000 corporations with annual revenues of less than 750 million euros, employing about 1.8 million people.  

Ireland had several extensive conversations with the parties involved before approving the arrangement. According to RTE, Ireland's main radio and television station, these conversations cover the nature of prospective exceptions or flexibility for specific sectors such as research funding.  

Though there are significant technical works to be done in the upcoming months and years before the new regulations come into effect, which is likely to happen in early 2023, the statement said. The 140 member jurisdictions of the OECD's Inclusive Framework will convene on Friday to achieve the deal. 

Image: Twitter/ @Paschald