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FRANKFURT – The Irish economy is unlikely to suffer significantly if a global minimum corporate tax is introduced, according to the country’s central bank chief.
Ireland has one of the lowest corporate tax rates in Europe at 12.5 percent – attracting many global companies to locate and report their profits there. Dublin is thus on a collision course with a US proposal, supported by 130 countries, to introduce a worldwide minimum tax rate of 15 percent.
Estonia and Hungary are the only other EU objectors to oppose the agreement.
“The change in corporate tax rate will certainly have some impact [on the Irish economy]“Irish Central Bank Governor Gabriel Makhlouf told POLITICO. That would be an exaggeration. “
Ireland is often criticized for allowing companies – including Apple, Google and Pfizer – to post profits there rather than in their home countries or where they do business. But, from Makhlouf’s perspective, Ireland’s appeal to big business goes well beyond its tax haven status.
“Taxes can be changed fairly regularly,” said Makhlouf, who also sits on the 25-member Governing Council. “So [a firm’s] Judgments are based on trust … in the quality of the workforce, the quality of the government. “And if companies have only been there for decades, they become unlikely to leave, he added.
Ireland also has a long history of hosting multinationals, “particularly in the pharmaceutical and technology sectors,” he said. “You just have to travel across the country to see real economic activity … It’s not an artificial thing.”
Ireland’s tax laws have drawn the ire of its EU partners who are demanding that the low tax rates draw tax revenue from their coffers. Apple’s Irish arm, for example, posted more than € 35 billion in pre-tax profits from its intellectual property rights held in the country in 2019, which comes down to nearly € 6 million for each of its 6,000 employees there. This practice enables it to post far lower profits in countries with higher tax rates.
Makhlouf warned, however, that it is premature to forecast how badly Ireland could ultimately be hit by a global tax.
“Everything about taxes is in the details,” he said. “It really depends on what is agreed in the end.” He noted that reports of a deal quickly followed news of possible exemptions for certain sectors in certain countries.
He also stressed that negotiating positions are subject to change, noting that some countries initially set a common rate of 21 percent before committing to 15 percent.
The statements made by the head of the Irish Central Bank, who is completely independent of the government, contradict the position of Irish politicians who continue to oppose the introduction of the global minimum tax rate because tax competition is a fair way to attract foreign investment.
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