Global minimum tax: Ireland and other holdouts face mounting pressure to fall in line
- With its relatively low 12.5 per cent corporate tax, Ireland does not want to lose out on foreign direct investment by agreeing to impose a 15 per cent tax on multinationals
- Other notorious tax havens have already signed up, including Hong Kong, Singapore and Switzerland
In 2009, economist Jim Power went on prime-time Irish television to advocate temporarily raising the corporate tax rate by 5 per cent as a way of helping the country out of a historic economic crash that decimated its national finances.
Not only would this help restore the public purse, he contended, it would also “build solidarity” with corporations that had been enjoying enormous tax savings while many of the country’s citizens were losing their jobs and homes.
“The reaction I got from all quarters was vitriolic, to be honest. The Industrial Development Authority and Department of Finance all argued that the one thing our corporate tax system had going for us was certainty. They could guarantee companies a 12.5 per cent tax rate, and once that goes up, albeit temporarily, that certainty would be smashed,” Power said.
Twelve years on, the anecdote helps illustrate the depth to which a low corporate tax is buried in the national psyche of Ireland – a country on the western tip of the European Union with fewer than 5 million people, which had nonetheless brought in more than €1 trillion (US$1.18 trillion) worth of foreign direct investment by 2019, according to its Central Statistics Office.
It also explains why, to the ire of the EU and the United States, Ireland is among the last holdouts against a global tax-reform plan that would see a minimum corporation tax rate of at least 15 per cent implemented worldwide, as well as a change in the rules to force multinational countries to pay most of their tax wherever a transaction is made, rather than where it is registered.
