Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Deputy. I will just put on record the formal answer to the question Deputy Cowen asked about a number of countries that have a derogation. The derogation provided for under Article 50 of the directive allows an EU member state in which no more than 12 UPEs of groups in scope of pillar 2 are located to elect for delayed operation of the IIR and the UTPR for six years. It is anticipated that five to six EU member states will so elect. Where the ultimate parent entity of a multinational entity group is located in a member state that has made an election, the constituent entities of the group located in the state shall be subject to the UTPR top-up tax amount allocated to the state for the fiscal years beginning on or after 31 December 2023. When the election is in effect, the ultimate parent entity is required to nominate a designated filing entity in a member state other than the member state in which the ultimate parent entity is located or, if the multinational entity group has no constituent entity in another member state, in a territory that has for the reporting fiscal year a qualifying competent authority agreement in effect with the member state in which the ultimate parent entity is located. The designated filing entity is required to file a top-up tax information return. The constituent entities located in a member state that has made an election will provide the designated filing entity with the relevant information and will not be required to file a return themselves. In respect of the decision point concerning the additional year, that would have been made at the OECD G20 inclusive framework. That was the basis of the decision.

On Deputy Doherty's question, in a scenario where the US does not pass any legislation, first, its guilty rate is due to increase to over 16% in 2025. This is expected to prompt legislative change in the United States as a result of that increase kicking in by default. After UTPR safe harbour comes to an end, where a US-parented multinational entity group has a group entity in any pillar 2 jurisdiction, then the UTPR will operate in those jurisdictions to collect the top-up tax from the US entities to reach the 15% rate. The Deputy can see how that raises a very significant issue for the US. As a result, we would not envisage that scenario being allowed to come to pass.