The Irish government is on the defensive as a new global tax plan could threaten its status as a tax haven for multinational corporations like Apple.
At the beginning of 2021, the G7 group of states agreed to close tax loopholes that are being leveraged by global companies by enforcing a minimum corporate tax rate of at least 15%. Now the New York Times reports that Ireland is planning a fight.
The New York Times reports that Ireland is “crouching” to battle a potentially serious threat to its livelihood. Ireland has long been attracting big companies like Apple, Google, Facebook and Twitter by offering low corporate tax rates. The country’s economic boom through foreign investment since the 1990s has even been given a term, the “Celtic Tiger”.
“Ireland is a tax haven operating in Europe so it makes sense that Ireland will resist this as hard as possible. The Celtic tiger is something to be proud of and if the model breaks they have to look like it is them. ” defend it as best as possible, “said Alex Cobham, CEO of the Tax Justice Network.
Ireland currently has an official corporate income tax rate of 12.5% and a tax system that helps multinationals based in the country avoid paying taxes to other nations where they are making profits. This has helped Ireland raise billions of euros and create hundreds of thousands of local jobs.
Ireland has resisted the planned tax reform. The country was among nine countries that failed to sign the major tax reform in early July, and joined other low-tax countries like Barbados.
While both tax revenues and jobs are at stake for the Irish government, the prospect of defending against it could be difficult. The New York Times reports that Ireland appears to be denying other countries their fair share of tax revenues.
A revised global tax system could cost Ireland € 2-3 billion a year. Much of it would go to other countries. Ireland collected around € 12 billion in corporate taxes in 2020.
The Irish Treasury Secretary declined interview requests and the opportunity to answer written questions. Large multinational corporations that have benefited from Ireland’s tax policies also declined to comment to the New York Times.
If tax reform is implemented, large companies that have set up in Ireland are unlikely to leave immediately as they spent time and resources making the country their European base.
For Apple, analysts believe that the proposed tax rules could “almost completely” destroy the benefits of previous tax cuts. In January, however, Apple CEO Tim Cook spoke out in favor of tax reform.
“I think logically everyone knows that it needs to be revised. I would be the last to say that the current system or the past system was the perfect system, ”Cook said at the time. “I am hopeful and optimistic that you (OECD) will find something.”
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