Ireland joins OECD tax agreement, ends status as tax haven for multinationals

Ireland on Thursday announced that it will join an Organization for Economic Cooperation and Development agreement that brings an end to the country's low-tax policy for large multinationals, an incentive that attracted companies like Apple and Google to its shores.

By joining the OECD agreement, Ireland is ditching its longstanding 12.5% tax rate to comply with a minimum effective corporation rate of 15% for multinationals with global revenues that exceed 750 million euros (about $867 million) annually. The country's cabinet agreed to the deal ahead of a wider OECD announcement scheduled for Friday, reports The Guardian.

Ireland was among nine countries to staunchly refuse the OECD pact and in June pushed for compromise on the proposed global tax rate. At the time, the G7 agreed to make sweeping changes to international tax law, including closing off tax loopholes used by companies like Apple.

"I'm absolute convinced that our interests are better serviced within the agreement," Paschal Donohoe, Ireland's finance minister, said in a statement. He added that Ireland was partially successful in its plea for compromise, noting that Dublin was able to remove the phrase "at least" from a July draft that sought a tax of "at least 15%," the report said. The language suggested that additional rate hikes were in the works.

Dublin received assurances that the 15% rate would not be changed in the near future, Donahoe said in a lengthy statement explaining the turnabout.

"Overall I believe this agreement will bring long term stability and certainty to the international tax framework," he said. "We have been involved in these discussions for many years and this is the significant milestone in what has been an ongoing process to reform the international tax rules."

According to Ireland, the 15% tax rate will apply to 56 Irish multinationals employing about 100,000 employees and 1,500 foreign multinationals employing some 400,000 people. Companies making less than 750 million euros a year are subject to the old 12.5% tax rate, which has been in effect since 2003.

The Irish government is supposedly not worried about a potential mass exodus of multinationals that set up shop in the region to reap the benefits of a lower effective tax rate, sources told The Guardian. Corporations looking to pull out would likely have already done so, as tax policies that allowed for more lucrative strategies like the "Double Irish" loophole were squashed in 2015.

Apple was known to have perfected an evolution of the tax avoidance strategy — dubbed the "Double Irish with a Dutch Sandwich" — by funneling overseas revenue through properties in Ireland and the Netherlands, including its European headquarters in Cork. By some estimates, the company saved some $9 billion per year by employing the plan. The European Commission took issue with the low rates enjoyed by Apple, calling it illegal and ultimately charging the tech giant $14.4 billion in back taxes. That ruling is currently under appeal.

Barring unforeseen roadblocks, the OECD rules are scheduled to go into effect in 2023.

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20 Comments

rcfa 17 Years · 1123 comments

About 3 years ago

As if 12.5% weren’t enough. Remember, there were tax revolts over the “10th” (10%) that people had to yield to government/nobility in the past.

Also: big corporations split their business activities over a series of subsidiaries, each doing below the 750m threshold in business, thus being subject to the 12.5% tax rate. Problem solved.

darkvader 15 Years · 1146 comments

15% corporate tax is still FAR too low. Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible. That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

chadbag 13 Years · 2029 comments

darkvader said:

15% corporate tax is still FAR too low. Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible. That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0. People would get paid more and your economy would grow. Corporations don't pay taxes. Their customers do.

22july2013 11 Years · 3736 comments

chadbag said:

darkvader said:

15% corporate tax is still FAR too low. Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible. That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0. People would get paid more and your economy would grow. Corporations don't pay taxes. Their customers do.

And don't forget, not a single corporation owns itself, either in whole or in part. Every single share of every publicly or privately traded company is owned by human beings, who are already paying capital gains taxes on the shares that they own. I don't see any value in double taxation. Just tax the owners of the corporation as much as you want. If you tax corporations 40% on their profit and then the owners of the companies another 40% on their gains, that's a double tax on the same corporate income.

I'm not saying don't collect taxes. I'm saying that taxing the same profit twice is a cheap way to hide the true tax rate. If you tax both people and corporations by 40% then that works out to people keeping (100%-40%)*(100%-40%)=36% of their income which is a tax rate of 64%. That's pretty steep. But if that's what you want, then do it.

F_Kent_D 6 Years · 98 comments

Thing is, call it what you want but the matter here is the more money the government keeps the less money people have in their pocket to spend at the corporations that will be paying more in taxes just as they’re forced to pay a higher minimum wage to every employee. Lights, water, and rent aren’t free and prices go up when that margin is squashed.