The Irish government is on the defensive because of a new global tax plan could threaten its status as a tax haven for multinational corporations like Apple.
Credit: Apple
Earlier in 2021, the G7 group of nations agreed to close tax loopholes leveraged by global companies by enforcing a minimum corporate tax rate of at least 15%. Now, The New York Times reports that Ireland plans to put up a fight.
The New York Times reports that Ireland is "hunkering down" to battle what could be a significant threat to its livelihood. Ireland has long lured major companies like Apple, Google, Facebook, and Twitter by offering low corporate tax rates. The country's economic boom from foreign investment since the 1990s has even gained a term, the "Celtic Tiger."
"Ireland is very much a tax haven operating in Europe, so it makes sense that Ireland will resist this as hard as they can. The Celtic Tiger is something to be proud of, and if the model is breaking they need to look like they are defending it as much as possible," said Alex Cobham, chief executive of the Tax Justice Network.
Currently, Ireland has an official corporate tax of 12.5% and a tax regime that helps multinational companies based in the country avoid paying taxes to other nations where they make a profit. This has helped Ireland garner billions of euros and create hundreds of thousands of local jobs.
Ireland has pushed back against the proposed tax overhaul. The country was among nine that did not sign on to the sweeping tax reform earlier in July, joining other low-tax nations like Barbados.
Although both tax revenue and jobs are at stake for the Irish government, the optics of fighting back could be difficult. The New York Times reports that Ireland risks looking like it wants to deprive other countries of their fair share of tax revenue.
An overhauled global tax system could cost Ireland 2 billion to 3 billion euros each year. Much of that would go to other countries. Ireland brought in roughly 12 billion euros in corporate taxes in 2020.
Ireland's finance minister declined interview requests and the opportunity to answer written questions. Major multinational corporations that have benefitted from Ireland's tax policies also declined comment to The New York Times.
If the tax overhaul is implemented, major corporations who have set up shop in Ireland aren't likely to leave right away, given the time and resources they spent making the country their European base.
For Apple, analysts believe that the proposed tax rules could "almost completely" erase benefits of prior tax reductions. However, back in January, Apple CEO Tim Cook voiced his support of a tax overhaul.
"I think logically everybody knows it needs to be rehauled, I would certainly be the last person to say that the current system or the past system was the perfect system," Cook at the time. "I'm hopeful and optimistic that they (OECD) will find something."
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