Barry Cowen (Laois-Offaly, Fianna Fail) | Oireachtas source

The thrust of the budget and the Finance (No. 2) Bill is to position the economy for the long term and for come what may. It is right that it should deal with the cost-of-living measures of now and also salt away some money for the future in infrastructure and other funds. Our ability to do that is dependent on us continuing to have the buoyant corporate taxes we currently have and that is where I want to focus.

In the Minister for Finance’s budget speech, he referred to the global project to reform the taxes of multinational companies but only days after the budget, I was shocked to read that the US Secretary of the Treasury Janet Yellen told our Ministers in Luxembourg that she is refusing to implement what was to be a joint global pact for a 15% corporate tax rate. Within days of the Minister calling it a global project, we were reminded that it is now possibly just an EU project, with the US, China and, I am sure, other blocs not in it. I do not think there is much awareness that this is possibly no longer global. There is a danger that it will become a huge competition and competitiveness issue for European investment and innovation. Not only has Ireland reversed its stance on the once untouchable 12.5% rate, but we are now possibly going to be the tax collector for all locations that did not sign up to the 15% rate. That is only for our own companies though, not for any headquartered in US or China that have resisted the new rules.

Pillar 2 of the OECD deal is a series of interlocking provisions designed to ensure that the income of a multinational group is subject to at least a 15% minimum rate of tax regardless of where it is earned. With the EU minimum tax directive, EU member states have collectively agreed to implement the pillar 2 income inclusion rule, IIR, for fiscal years beginning on or after 31 December 2023 and the pillar 2 undertaxed payment rules, UTPR, for fiscal years beginning on or after 31 December 2024. This means that low-taxed subsidiaries of EU-headquartered multinational groups will be subject to an income inclusion rule beginning in 2024, which will result in a top-up tax even for subsidiaries that are not subject to the local qualified domestic minimum top-up taxes, QDMTTs. Accordingly, low-taxed subsidiaries of US multinationals will not be subject to an income inclusion rule as long as those subsidiaries are not held through an intermediate parent entity in a country that has an IIR. This means that low-taxed subsidiaries of US-headquartered multinational companies will be subject to top-up tax in 2024 only if the subsidiaries are subject to local QDMTTs or an IIR of a country that is home to their intermediate parent. Moreover, if countries implementing pillar 2 were to further delay the undertaxed payment rule or abandon it, the unlevel playing field between EU and US-headquartered multinational companies would continue beyond 2024.

Could the Minister of State give us some information on this in her response? First, could she give us an impact assessment report on the delayed imposition of the undertaxed payment rule on Irish companies compared to their US competitors? Could she also give us a report on the amount of one-off costs imposed on Irish companies by the imposition of the IIR a year before the 15% global rules are required to be rolled out around the world, including whether there is an unintended cost for businesses? Could she also provide a report on the increased costs on Irish companies and how many jobs could be lost by reducing the amount that would be available for investment due to this unintended tax imposed unfairly?

The OECD recently published a draft law on that plank of the deal, known as pillar 1, saying that it would lead to greater losses than originally forecast for investment hubs such as Ireland. Department of Finance estimates put Ireland's losses at €2 billion a year, but those estimates are more than two years old. Could the Minister of State give us an up-to-date number in this debate? With the move by the USA, is it still the Department of Finance’s view that a 15% tax is likely to ultimately net the Exchequer increased revenues? How could that be, given all the concern we are reading and hearing? Pillar 2 should be implemented in a manner consistent with its stated policy objective of ensuring multinational groups are subject to at least a 15% minimum rate of tax in each jurisdiction where they operate. This requires that the pillar 2 treatment of multinational companies and groups does not depend on where they are headquartered.

I urge consideration of policies that ensure EU-headquartered multinational groups do not face a competitive disadvantage relative to their global peers. One recommendation is for EU member states to align the effective dates of the IIRs and UTPRs they implement to ensure a level playing field for EU-headquartered multinational companies. If this is not possible, I recommend that EU member states adhere to the implementation timeline reflected in the EU minimum tax directive so there is only a one-year gap between the application of their IIRs and UTPRs. Delays in implementation of the UTPR, as well as any further limitations on the application of those rules, such as the temporary safe harbour provided for under the July 2023 administrative guidance, should be avoided. This would contain the competitive disadvantage faced by EU-headquartered multinational companies and groups to 2024.

As Cathaoirleach of the Oireachtas Committee on Budgetary Oversight, I will be raising this with the committee when we meet. We will review any impact assessment of the cost of this measure on Ireland. I would be concerned that without it being a global measure and without ameliorating measures in this Bill, it will result in European and Irish accountants speedily seeking safer harbours for their profits for taxation reasons.

It would be good if the Minister would outline any ameliorating amendments he will introduce in the Bill and what backstop he will put in place in the event that the US never participates or continues to be allowed by the OECD to defer. I am concerned that unless precautionary measures are in place, it will cause problems here and make Ireland and the EU even more uncompetitive. The tech industry is already in retrenchment in this country and we do not need further problems with digital taxes. Rather than the OECD move being a win for Ireland and Europe, it could just be a win for the US and China. Will the Government convene a meeting of major Irish- and EU-headquartered companies in Ireland to assess their concerns and needs? I will be requesting that the budgetary oversight committee ask the Minister for Enterprise, Trade and Employment, Deputy Coveney, and IDA Ireland for their views on what could be a watershed finance Bill for Ireland in the context of this US tax wrinkle.

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