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Biden administration could 'heighten' US engagement on global tax reform, says Paschal Donohoe

Donohoe was speaking at the launch of an update to Ireland’s corporation tax roadmap.
Jan 14th 2021, 2:34 PM 13,692 16

UNILATERAL MOVES BY countries like France to tax technology companies create “clear and present” economic threats for Ireland, Finance Minister Paschal Donohoe has said.

A “consensus-based, globally-agreed approach” to international tax rules is needed to ensure that tax rules “evolve to match the modern world”, he told reporters today.

The minister was speaking following the publication of an update to Ireland’s corporation tax roadmap.

It details the changes made to the government’s tax regime in recent years.

Ireland pulled in €11.8 billion in corporation tax receipts last year, nearly a €1 billion more than in 2019.

Changes to international tax rules currently being discussed by OECD countries could cost Ireland up to €2 billion in corporate tax revenues, the minister said.

Nevertheless, the Irish government believes that a broad, global agreement on taxation that includes the United States — such as the one currently being hammered out through the OECD — is the best way of delivering global tax reform while preserving Ireland’s ultra-competitive tax environment.

But progress on this agreement has slowed after US President Donald Trump withdrew the United States from the talks last year.

Frustrated by the impasse, France recently began demanding millions of euros in tax payments from US multinational tech corporations like Facebook and Amazon through a new digital tax.

Other European countries are also discussing similar tax reforms as a revenue-raising method in the wake of the pandemic.

Trump administration

Speaking today, Donohoe said that all countries will have to assess the compatibility of their tax codes with the modern digital economy.

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But he said, “I do believe that the safest place in which agreement on this really pressing debate can be reached is within the OECD.”

Donohoe said that the engagement from the Trump administration on this issue has been “an awful lot more active than the narrative around it might suggest”.

However, he expects American engagement to be “heightened” by the Biden administration and for discussions about global corporate tax reform to be “re-energised” within the OECD.

“That will mean that it is very possible that the OECD process across 2021 and 2022 could lead to further changes from a global tax point of view. And it means the potential for that kind of change.

“What I’m doing in this document is laying out the commitments that we have from a corporate tax perspective, and the changes that we are going to make in future finance bills,” he said.

Those commitments include:

  • Introducing rules that are compliant with the European Union’s Anti-Tax Avoidance Directive to limit aggressive tax planning
  • A public consultation on the possibility of moving to a territorial corporation tax regime in which companies would only pay tax on that portion of their profit that is earned in Ireland
  • Progressing the International Mutual Assistance Bill to strengthen administrative assistance between OECD countries on tax matters
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Ian Curran

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