A historic turning point has arrived in the field of international taxation. Ireland has joined the 15% global tax for multinationals. Considered the European tax haven par excellence due to its favorable taxation and the ad hoc agreements entered into with many companies - and for this reason chosen as a "home" by many of the US Hi-Tech giants including Facebook, Google and Apple - a a few days after the G20 and the new OECD meeting scheduled in Paris on 30-31 October, Ireland said yes to the agreement on the minimum corporate tax starting from 2023 to which 130 countries had already given their go-ahead.
The official announcement came late yesterday evening from the Irish Finance Minister, Pascal Donohoe, after the go-ahead from the Dublin Government: “It is a point of balance between our competitiveness and our place in the world. It will ensure that Ireland is part of the solution to the problem, while respecting the future international tax framework,” he said. "It is a difficult decision but, I believe, a fair and pragmatic one", she added, reassuring that Ireland will remain an attractive country for investments by international multinationals.
GLOBAL TAX: THE AGREEMENT WITH IRELAND
Dublin's go-ahead came after years of pressure and months of negotiations by the OECD and many EU countries. In fact, since the 80s, Ireland has applied a very low tax rate on corporate revenues and profits which has prompted many multinationals to move their tax headquarters to the Dublin area. The first was Apple, followed by Microsoft, Intel and in the 2000s by Facebook and Alphabet, the parent company of Google. Ireland raised its tax rate from 1997% to 10% in 12,5 to comply with EU state aid rules, but has since resisted pressure from other developed countries who have long accused Dublin of "competition unfair” in tax matters. With the adhesion to the global tax, the Irish resistance seems to have finally collapsed.
Based on the provisions, Irish corporate tax will therefore rise from 2023% to 12,5% from 15. The new rate will apply to companies with a turnover of more than 750 million euros, while under this threshold the tax rate will remain at 12,5%. According to calculations, the change will affect around 1.500 companies that employ over 400 workers in Ireland. The global tax will also affect state coffers since, according to estimates, it will reduce tax revenue by 2 billion a year.
“It is a momentous and hugely positive step for Europe's collective efforts to build a fairer and more stable global tax system,” tweeted European Economy Commissioner Paolo Gentiloni.
OK ALSO FROM ESTONIA
Among the EU countries that had not signed up the deal last July, in addition to Ireland there were also Estonia and Hungary. Well, a few hours away from Dublin, Tallinn too has decided to capitulate, giving the green light to the minimum tax on multinationals: "We join the agreement on the global tax", announced Premier Kaja Kallas, adding that this "will not change nothing for the majority of economic operators in Estonia, and which will only concern the subsidiaries of large multinational groups”. At this point, only Victor Orban's Hungary remains out, whose adhesion is however fundamental given that the EU requires unanimity in tax matters.
GLOBAL TAX: WHAT THE AGREEMENT PROVIDES
Once the Irish bulwark has fallen, the agreement on the global tax seems ever closer. According to forecasts, the agreement could already be signed at the G20 scheduled in Washington for 13 October or, at the latest, during the OECD meeting to be held at the end of the month.
The agreement reached in July in Venice is based on two cornerstones. The first foresees the introduction of a global minimum tax of 15% on multinationals with revenues exceeding 750 million euros. Simply put, if a company pays taxes in a country where effective taxation is less than 15%, the percentage remaining to reach this threshold will have to be paid in the country of residence, which for Hi-Tech giants corresponds in the vast majority of cases to the United States. A total revenue of 150 billion dollars a year is expected from this measure. The second cornerstone concerns multinationals with revenues in excess of $20 billion and an operating margin of over 10% of revenues. For them, a portion of profits, equal to 20-30% of profits exceeding 10%, will be taxed in the countries where those companies make sales, net of the registered office in any tax haven. Estimates speak of a possible revenue of 100 billion dollars a year.
