A deal on BEPS 2.0 could cost Ireland 20% of its corporation tax revenues

Speaking at an Irish Department of Finance international tax seminar, held virtually on 21 April 2021, Irish Finance Minister Pascal Donohue indicated that the cost to Ireland of agreement on BEPS 2.0 is estimated to be 20% of Irish corporation tax revenues. He sees this as a price for the certainty and global stability that is needed. The Minister acknowledged the energy from the new US administration towards a global deal and the renewed momentum in the process, as seen at recent G7 and G20 meetings of finance ministers. Ireland will continue to engage constructively in the Pillar 1 and Pillar 2 discussions.

He noted that his reservations on Pillar 2 have played out in recent weeks. Those reservations include that Pillar 2 would be used as a mechanism for global tax harmonisation, instead of addressing aggressive tax planning and remaining BEPS issues.  He said that "for Pillar 2 just as for Pillar 1, countries first need to agree on the political principles underlying the concept of a global minimum tax rate. This is a discussion we still need to have".

The Minister stood firm in respect of Ireland's 12.5% corporation tax rate, which he considers fair. He considered that any BEPS 2.0 agreement needs to accommodate healthy, proportionate and fair tax competition, and respect tax sovereignty. Countries such as Ireland need to be able to use tax policy to compensate for the various real, material and persistent advantages that larger countries enjoy. "We must have an agreement that also works for small countries", he said, adding that he wants a deal that facilitates acceptable tax competition "aligned to key principles, such as substance and creation of real value, and accommodates Ireland’s 12.5% rate".

Speaking at the seminar, the OECD's Pascal Saint-Amans also thought that there was a new dynamic to the process with the Biden administration engaging to progress the stalled discussions on Pillar 1. He said that a "strong" pillar 2 would also be necessary to ensure a fair, acceptable, and sustainable tax system.

For more information on this please contact Philip McQueston or any member of our Tax team.

Date published: 29 April 2021