Ireland seeks input on OECD tax proposals’ impact on Irish tax policy

By Doug Connolly, MNE Tax

The Irish Department of Finance on July 20 opened a consultation on implications for Ireland’s corporate tax policy arising from the two-pillar proposal for overhauling the international tax framework recently endorsed by 130-plus countries in the OECD Inclusive Framework.

Ireland is one of only seven countries in the Inclusive Framework that have so far declined to endorse the agreement. The country has specifically objected to the proposal under Pillar Two of the agreement for a global minimum tax of “at least 15%.” Such an agreement would put Ireland – with its investment-attracting 12.5% rate – in a position of having to raise its corporate tax rate or see Irish-based profits be subject to top-up tax in other jurisdictions.

The consultation states that Ireland is “not yet in a position to join the agreement,” but that it is “committed to the process and aims to find an outcome that Ireland can support.” The document also acknowledges the importance of the 12.5% corporate tax rate to Ireland’s economic policy and success in attracting investment.

The Irish Examiner has recently reported that Irish government officials have suggested that the country is likely to give up its 12.5% later this year to comply with the OECD agreement. The OECD’s tax director Pascal Saint-Amans has suggested that the agreement will go ahead with or without Ireland. Relatedly, Gibraltar’s Chief Minister announced today that the territory would start increasing its corporate tax rate (from 10% to 12.5%) in anticipation of a coming agreement on at 15% global minimum tax.

Consultation questions

The Irish Department of Finance seeks feedback regarding how Ireland can continue to support its economic goals in light of the OECD tax proposals.

To this end, the consultation asks about “specific implications for Ireland’s corporation tax regime that would arise from adopting and implementing the OECD proposals.” It is also specifically interested in feedback about the implications for Ireland’s tax policy of adopting Pillar Two’s income inclusion rule, under-taxed payments rule, and subject to tax rule.

Similarly, given “the significance of US MNEs in Ireland,” the consultation seeks comment on how related US tax proposals, such as GILTI and SHIELD, could have important implications for the Irish tax code.

Regarding the “Pillar One” proposal for re-allocating a portion of taxing rights to market countries, the consultation states that Ireland supports the proposals even though “[t]here will be a cost to Ireland for this in terms of reduced corporation tax receipts.” Nonetheless, the consultation asks for input about any particular implications of the Pillar One proposals for Ireland.

Comments on the consultation will be accepted until September 10.