While recognizing “the role of legitimate tax competition”, Ireland, which is the European headquarter of tech giants like Apple and Google, is trying to come to a compromise over global taxation, said the country’s finance minister in an interview to CNBC.
Ireland has been chosen by the tech companies as their taxation headquarters for their European operations because the country offers a low corporate tax rate of just 12.5 per cent. A recent agreement between the seven most advanced economies of the world seeks to potentially challenge the low corporate tax regime of Ireland.
Earlier this month, an agreement between the finance ministers of the G-7 countries about the requirement for a minimum global corporate tax rate of 15 per cent was arrived at, according to the suggestions by the Biden administration. This an effort of the countries to resolve calls for a fairer tax system.
“What we are going to do is engage in the OECD process very intensely across the coming weeks and months, and I do hope an agreement can be reached that does recognize the role of legitimate tax competition for smaller and medium-sized economies,” Irish Finance Minister Paschal Donohoe said in the interview.
The OECD is currently discussing the G-7 plan for a global corporate tax while the leaders of the G-20 countries are also set to discuss the matter. The aim of this move is to convince as many countries as possible to support the proposal so that the chances of implementing the proposal are increased.
“We still have some time to go before a final agreement is reached, and so it is difficult for me to say what that compromise could yet look like. But I do believe it is in the interest of everybody to find a compromise,” Donohoe said in the interview.
In 2016, the European Commission ruled that illegal tax benefits in Ireland had been granted to the US tech giant Apple by the government and had consequently Dublin to collected 13 billion euros ($15.49 billion) from the tech giant in taxes. That decision was contested by Ireland and Apple and the case is now being reviewed by Europe’s highest court.
In the wake of the Covid-19 pandemic, taxation has become particularly important with many countries getting desperate for new or stronger sources of income in order for them to be able to repay the debt incurred during the crisis.
The sale of 10-year bond sale, which is as part of a wider 800 billion euro stimulus plan, helped the European Union to raise 20 billion euros earlier this week. This was the first occasion that the markets were tapped by the European Commission on behalf of the 27 member countries of the European Union. That offer was apparently popular among investors because it was over seven-times oversubscribed.
“In a nutshell, I expect the first disbursements to take place in the second half of July,” EU Budget Commissioner Johannes Hahn said on Thursday about when the money borrowed from the markets will start to arrive at the individual EU nations.
(Adapted from CNBC.com)