Global Minimum Tax Agreement | Ireland and Estonia have agreed to raise the tax rate for multinational companies

(Dublin) The Irish and Estonian governments agreed on Thursday to raise corporate tax rates to join a global tax reform pact negotiated under the auspices of the Organization for Economic Co-operation and Development, removing one of the latest obstacles to the project’s outcome.

Joe Stinson
France media agency

After “detailed discussions, the government has agreed to my recommendation that Ireland join the international consensus” on taxes, Finance Minister Pascal Donohoe said at a news conference.

“This is a very important step” in global reform, he said, adding that in order to find a compromise, the agreement now spoke of corporate tax at an effective rate of 15%, not “at least 15%”, a language that Dublin opposed because it left the door open for increases. future.

In the process, the Estonian prime minister announced that Tallinn, in turn, had acceded to the agreement. Prime Minister Kaja Kallas stressed that this “will not change anything for most economic actors in Estonia and will only concern subsidiaries of large multinational companies”.

All eyes are now on Hungary, which is still among the countries that have not yet signed the treaty.

Hungarian Foreign Minister Peter Szijjarto wrote on Facebook on Wednesday after meeting US Secretary of State Anthony Blinken in Paris that “Hungary is ready to make concessions if we can agree on a deal. It does not harm the Hungarian economy.” […]. Based on the discussions in Paris, I have the impression that there is a chance of that happening.”

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The broad global tax reform negotiated under the auspices of the Organization for Economic Co-operation and Development (OECD), and which regained momentum with the coming to power of US President Joe Biden, has thus reached a milestone.

After months of bans, Dublin, which has a 12.5% ​​corporate tax rate, one of the lowest in the world, doubled data suggesting a compromise on Wednesday.

The landmark agreement announced in July, which belongs to 134 countries at the time, will be binding on multinational companies with a turnover of at least 750 million euros, including several large technology groups.

Ireland’s finance minister on Thursday welcomed the agreement, which thus brings “certainty” and allows Dublin to remain an “attractive destination” for businesses.

“This is an important decision for our industrial policy, and for our future, it is complex. There will be consequences, but there are many opportunities,” Donohue said.

Following the Irish and Estonian decisions, US Treasury Secretary Janet Yellen estimated that “we are on our way to achieving change where there is only one change per generation, to create a minimum tax rate worldwide, which will balance competition and boost employment and investment in the United States.”

“De Rafstolage Pays Riches”

As countries seek funds to restore their public finances damaged by the pandemic, this reform aims to combat tax evasion by multinational companies, mostly American, that register in countries with low tax rates.

By signing this compromise, Dublin is changing its low-tax economic model that has enabled it to attract many multinational companies, particularly technology or pharmaceutical giants, that have registered their European headquarters there.

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According to a poll by The Irish Times, a large part of the Irish were in favor of keeping the rate at 12.5%, which has enabled the country to achieve rapid economic growth over the past 20 years.

The deal sparked criticism from the NGO Oxfam, which on Thursday lamented that “what would have been a historic deal to end the era of tax havens has become a patchwork of rich countries instead”.

Proposing a (lowest) global tax rate of 15% would greatly benefit rich countries and increase inequality. Susanna Ruiz, head of policy taxation at Oxfam, said she regrets that the G7 and the European Union take back two-thirds of new tax revenue, but that the poorest countries are only 3% while they represent more than a third of the world’s population.

The OECD’s Comprehensive Framework for Action, an expanded version of about 140 countries, meets on Friday in a bid to endorse final parameters for reform, ahead of next week’s G20 ministerial meeting. The goal is to implement the reform by 2023.

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