Irish corporate tax take under threat as global deal edges closer

IRELAND faces renewed pressure on corporate taxes after France and Germany threw their weight behind US proposals for a 21pc global rate.

“I’m quite optimistic that we will have a good solution this summer, and this will change international taxation a lot,” German finance minister Olaf Scholz said yesterday.

“About the concrete details, we will have to find an agreement with anyone else, but it’s obvious that we understand the necessity for taking courageous decisions.”

If a rule is introduced that corporations have to pay at least a 21pc tax on profits, it would end any real benefit to businesses from Ireland's lower 12.5pc rate.

The minister for finance, Paschal Donohoe, said he was “not at all surprised” that France and Germany are backing minimum taxes.

“They are restating long-known and well-held positions in relation to corporate tax levels within the EU,” he told TDs in the budgetary oversight committee yesterday.

But he admitted and that “solidarity is in short supply” on tax matters, and said Ireland would have to “make the case” for tax competition at EU and global levels.

“Solidarity tends to be in relatively short supply in the contest for foreign direct investment and in the contest for investment that can build tax revenues within the jurisdiction of each country,” he said.

He said Ireland would be "engaging directly” with smaller countries in the EU and in the Organisation for Economic Cooperation and Development (OECD), which is steering global talks.

“It will be up to us to make the case for tax competition, within certain parameters, being a legitimate policy response back to the disadvantages of size or location.”

In a joint press conference with his German counterpart yesterday afternoon, France's finance minister, Bruno Le Maire, said he would “not spare our national efforts” to reach a deal “in close cooperation with Germany”.

“A race to the bottom on the taxation system will not be a solution for any European country,” Mr Le Maire said.

Earlier, in a joint interview with Le Figaro and Die Zeit, Mr Scholz said he had “nothing against the US proposal” while Mr Le Maire said he “would also be agreed” if that was the outcome of global talks.

The OECD is leading talks among 139 countries on how to tax large multinationals, including a new definition of taxable income and a global minimum rate “not less than 12.5pc”.

Those talks are due to wind up in July, but may stretch to October.

Franco-German support means an OECD deal has cleared a first hurdle as, along with the US, they are the largest Group of Seven (G7) economies.

A G20 meeting this summer will be the next hurdle to clear.

“We are now on a very good track,” said Mr Scholz. “We will have a solution. It will be a consensus and a compromise, obviously, but it is now in a situation we never would have expected some years ago, and this is really, really something very promising.”

The French and German ministers have jointly presented spending and reform plans to the European Commission to access the EU’s €750bn pandemic recovery fund, ahead of an April 30 deadline.

Mr Scholz however denied a Financial Times report that Ireland’s €900m share of the fund was dependent on clamping down on taxes, telling the Irish Independent it was “not the style of the French Republic and of Germany to do things like this”.