Ireland — formerly one of the few holdouts for a pending international “global minimum tax” plan — has joined the agreement.
During a June meeting of the G7, President Biden and other world leaders proposed a “strong global minimum tax” of “at least” 15%. The White House lauded the policy as a “critical step towards ending the decades-long race to the bottom that pushes nations to compete over who can offer the lowest tax rate to large corporations at the expense of protecting workers, investing in infrastructure, and growing the middle class.”
Smaller nations — which have historically relied upon lower corporate taxes to compete on the world stage with more developed economies — were initially hesitant to sign the deal. In July, a handful of countries — Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, Sri Lanka, St. Vincent, Peru, and the Grenadines — refused to join the 130 other Organization for Economic Cooperation and Development member states that endorsed the plan.
Among the most important holdouts, however, was Ireland, which has historically relied upon its 12.5% corporate tax rate to differentiate itself from its Western European neighbors.
As Irish finance minister Paschal Donohoe said: “Ireland expressed our broad support for the agreement on Pillar Two but noting our reservation about the proposal for a global minimum effective tax rate of ‘at least 15%.’ As a result of this reservation, Ireland is not in a position to join the consensus.”
However, Deputy Prime Minister Leo Varadkar announced in early October that the OECD has amended the text of the arrangement in a way that “does respond to a lot, if not all of the concerns” raised by Ireland. Indeed, the new version of the bill removed the phrase “at least” — implying that the minimum tax rate will not be hiked in the future.
“In joining this agreement, we must remember that there are 140 countries involved in this process and many have had to make compromises,” said Donohoe. “But I also believe that the agreement [sic] government has agreed to sign up to today is balanced and represents a fair compromise reflecting the interests and input of the many countries involved in the negotiations.”
However, CNBC reports that an opinion poll for The Irish Times shows that the majority of voters in Ireland believe the government should not modify its tax policy.