No country will be able to undercut Ireland under a new global 15 per cent minimum rate of corporation tax, according to Tánaiste Leo Varadkar.
Before the Cabinet meeting to consider the strategic change in industrial policy, Mr Varadkar told the Dáil that Minister for Finance Paschal Donohoe confirmed to him that Ireland has "received assurance" that it can still charge the 12.5 per cent rate for SMEs with operations of less than €750 million.
He also said the Exchequer would lose an estimated €2 billion a year in corporate profit tax under the new global arrangement but he stressed that it was only an estimate and “may well be updated”.
But he said that by agreeing to the new rate “there is the advantage of no country being able to undercut us”, which had happened in recent years.
He said they were concerned to ensure that “whatever rate is agreed is certain and will not ratchet up over time”.
“We want to make sure that our research and development tax credit is protected. “We also want to make sure that if countries sign up to this, they actually implement it. We do not want to be the country to implement it but for our competitors then not to do so.”
The negotiations on global corporation tax have been about larger countries trying to “get a larger share of the pie and taking it off us”, he said. “We had to protect our interests, seek guarantees.”
But People Before Profit TD Richard Boyd Barrett asked how the Tánaiste could "morally justify" being "willing to die in a ditch" over a minimal increase in tax on "absolutely staggering profits" of some of the largest and wealthiest corporations in the world.
And he asked how he could justify workers paying 20 per cent in tax while corporations pay 5 per cent.
The Tánaiste added that it was evidence that lower taxes could mean higher revenues and he believed that “taxes should be low, simple and fair”.
He stressed that the 12.5 per cent rate was a “huge success” resulting in 350,000 jobs including 100,000 indirectly and it was worth €12 billion a year in tax “roughly double what the average European country does”.
Labour finance spokesman Ged Nash said the Cabinet's decision would be "momentous", would affect national industrial strategy and "have far-reaching consequences for the economy, jobs and business".
He pressed the Tánaiste on the estimated €2 billion annual cut in income and said he should publish the figures because Mr Varadkar could not be saying they had not got them worked out.
But the Tánaiste insisted that “there are so many variables that it is very difficult to know”. The most rejected projection he had seen, which may have changed, was an annual revenue loss of €2 billion.
“However, nobody knows that for sure. Nobody predicted that after the most recent range of changes we made, corporation profit tax receipts would soar.”
He added that it would be a matter for the Minister for Finance to publish any updated figures.
