Ireland to defend right to set lower corporate taxes, finance minister says

Paschal Donohoe will be 'making the case for legitimate tax competition' at OECD negotiations

Ireland's finance minister Paschal Donohoe says tax competition is a legitimate tool for smaller countries that do not have the same resources as larger ones. Getty Images

Ireland will make the case for the role of legitimate tax competition, Irish finance minister Paschal Donohoe said after the Group of Seven advanced economies agreed on a minimum global corporate tax rate of at least 15 per cent.

“Today is an important sign post,” Mr Donohoe said. “It does have consequences for the future of corporate tax policy across the world, but in the process that is to come, I’ll be making the case for the role of legitimate tax competition,” he told reporters in London, adding that he will be engaging “constructively” with the Organisation for Economic Cooperation and Development and US Treasury Secretary Janet Yellen.

Any international agreement on how companies are taxed will need to meet the needs of “small and large countries, developed and developing”, Mr Donohoe said in am earlier tweet, noting that there are 139 countries in the OECD's negotiations on tax policy.

Ireland has a corporation tax rate of 12.5 per cent, which it has staunchly defended, even in the face of criticism from larger European countries. Tax competition is a legitimate tool for small countries, which may not have the same advantages as big ones, Mr Donohoe argued in April.

Changes to tax rules could result in Ireland losing up to a fifth of its corporate tax revenue, Mr Donohoe said, though this is already accounted for in medium-term budget calculations. Projections show the Irish economy returning to “a position of fiscal balance in the coming years”, even with a drop in corporate tax revenues, he added.

“We still have some time to go up to the OECD process and even then when the OECD process concludes, the actual agreement then has to be implemented,” he said.

The government is also looking at other policy areas to ensure that Ireland continues to remain a “very, very attractive place for domestic enterprise to flourish and for international investmen,”, Mr Donohoe added.