Donohoe warns of "disruptive" change to corporation tax

The Finance Minister Paschal Donohoe has warned "disruptive" change is coming to Ireland's corpor...
Jack Quann
Jack Quann

20.25 27 Sep 2019

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Donohoe warns of "disrupt...

Donohoe warns of "disruptive" change to corporation tax

Jack Quann
Jack Quann

20.25 27 Sep 2019

Share this article

The Finance Minister Paschal Donohoe has warned "disruptive" change is coming to Ireland's corporation tax.

He was speaking at an IBEC event in Dublin on Friday night.

Ireland's corporate tax rate, of 12.5%, is well behind others such as the UK (19%), Italy (24%), the USA (27%) and France (33.3%).


In 2013, OECD and G20 countries developed a package of 15 measures to tackle avoidance caused by tax base erosion and profit shifting (BEPS).

More than 130 countries are collaborating to put an end to tax avoidance strategies that the OECD said "exploit gaps and mismatches in tax rules to avoid paying tax."

It said BEPS practices cost countries between US$100bn (€91.3bn) and US$240bn (€219bn) in lost revenue annually.

On Friday, Mr Donohoe said: "The ongoing work at the OECD will result in further substantial alterations to the international tax architecture.

"The challenge before us is to build a global and robust tax architecture that works for all into the future.

"Make no mistake, whatever emerges from the discussions at OECD will be disruptive.

"These discussions are particularly difficult for small open, export orientated countries such as ours - but we must engage and make our voice heard."

He also said that an acknowledgement of the changing nature of where profits are generated "could produce amendments to current international tax rules" to satisfy countries who are calling for change.

"This is a logical development to account for the advent and adoption of digital technologies which are rendering traditional value chains and business models outdated.

"However, it is important that any move in this direction recognises a number of well-established principles.

"In particular, the existing transfer pricing rules must remain at the heart of the global tax framework.

"The significant value-creating activity that happens in exporting countries, like Ireland, must continue to be recognised and rewarded."

According to the OECD, corporate income tax remains a significant source of tax revenues for governments across the globe.

In 2016, corporate tax revenues accounted for 13.3% of total tax revenues on average across the 88 jurisdictions for which data was available. This figure had increased from 12% in 2000.

"Well placed to prosper"

On Brexit, Minister Donohoe said he is "under no illusions" as to the challenges.

"While we cannot be certain of the form Brexit will take or the effects, we are certain that the impacts for Ireland and others will present challenges.

"There will be a permanent loss of output. However, we are still well placed to prosper in an EU without the UK."

He added: "Over the recent period, preparations for Brexit have escalated significantly.

"We have taken a number of measures to minimise disruption, while, at the same time, initiatives such as Future Jobs Ireland, the Ireland Connected Trade and Investment Strategy, the National Development Plan, as well as broader measures to balance the public finances, will help the economy."

"I am confident that we have the economic, business and political know-how to manage our way safely through Brexit.

"However, we should also not be under any illusions about the nature of the challenge.

"In particular, it now seems evident that the current British government wants scope for regulatory divergence from the European Union, whether or not there is a deal.

"While the Irish Government respects the choice of the British government to pursue a path of regulatory divergence from the EU, there are clear implications for this island, and the Good Friday Agreement, that cannot be ignored in the event that this policy is pursued."

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BEPS Brexit Corporation Tax IBEC International Tax Irish Corporation Tax OECD Paschal Donohoe Tax Framework

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