Ireland has bowed to pressure from the US administration of President Joe Biden to increase its corporation tax from 12.5 per cent to 15 per cent, shifting the country’s status as a haven for global companies.
The estimated loss to the country from revenue is about €2 billion ($2.3 billion) a year.
Irish Finance Minister Paschal Donohoe announced the move after a Cabinet meeting on Thursday, where it was agreed the new tax rate would apply to companies with turnover in excess of €750 million ($865.8m).
Smaller businesses will still be taxed at the lower rate.
For decades, Ireland's tax rate attracted international corporations such as Google and Facebook, who stationed their European headquarters there.
But the government had come under increasing international pressure to sign up to the Organisation for Economic Co-operation and Development (OECD) deal on global tax reform.
The decision is a major win for the US, which has led calls for a global minimum tax rate of 15 per cent.
More than 1,500 companies in the Republic of Ireland are likely to be affected, as are 56 Irish multinational companies.
“The government has given approval today for Ireland to sign up to the political agreement at the OECD Inclusive Framework on a new tax framework to address the tax challenges of digitalisation,” Mr Donohoe said last night.
“We have secured the removal of ‘at least’ in the text,” he said.
“This will provide the critical certainty for government and industry, and will provide the long-term stability and certainty to business in the context of investment decisions.
“This 15 per cent rate will apply to 56 Irish multinationals employing approximately 100,000 people and 1,500 foreign-owned MNEs based in Ireland employing approximately 400,000 people.”
Earlier, Ireland’s deputy prime minister, or Tanaiste, said Ireland will be able to operate two tax rates if it agrees to sign up to the OECD deal on a global minimum corporate tax rate.
Leo Varadkar told the Dail – the lower house in the Irish legislature – that Ireland was given assurances it could continue to charge the 12.5 per cent tax rate to small and medium companies.
“The minister informed me today that we have received that assurance, that we can do that,” he said.
Mr Varadkar said existing estimates show Ireland could lose €2 billion a year in revenue from the change in corporate tax.
“That is only an estimate,” he said. “It’s based on certain assumptions which may or may not be correct.
“Our 12.5 per cent has been a huge success and is a really important part of our industrial policy.
“Over a quarter of a million people work in multinational companies in Ireland, we want to keep those jobs and the 100,000 or so indirect jobs that arise from those jobs.”