Pearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

5. To ask the Minister for Finance to outline the implications for Ireland of the recent decision by the new US Administration to withdraw from the OECD Global Tax Deal, making specific reference to both pillars of the agreement; and if he will make a statement on the matter. [5419/25]

Pearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

This question is on the OECD pillar 2. Obviously, for those of us who support the OECD process and the outcomes of that the decision by the American Administration to withdraw from it has caused serious questions about the implementation not only of pillar 1, which was stalled, but also the practicality of pillar 2. As this is transposed into domestic legislation it includes the provision of the undertaxed profits rule, UTPR, which could potentially see this State applying top-up tax to American companies. It was really never the intention for a major economic powerhouse to not be part of this, so I am asking where we need to go with this and what are the early considerations from the Department.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the Deputy for his question on this very important topic. At least he has a recognition of the value of organisations like the OECD. As to where we are, as the Deputy outlined Ireland signed up to a global tax deal. We did so in October 2021, as he is aware. That was part of an overall inclusive framework on base erosion and profit shifting as part of the G20 and OECD agreement. Ireland signed up to this as a pragmatic and sensible approach to address global uncertainty and provide the positive conditions and long term certainty for businesses and investors to prosper and grow.

Pillar 1 is a package comprised of amount A, which will see an allocation of taxing rights to market jurisdictions, and amount B, which will see a simplification of transfer pricing rules. Technical work on pillar 1 is well advanced, but there are a number of outstanding issues on amount B that have led to the emergence of a political impasse on the package as a whole. The implementation of pillar 2 of the agreement is more advanced. That refers to the minimum effective tax rate, which the Deputy is aware of. We have implemented this along with major economies such as Japan, the UK, South Korea, Canada and Australia and many of the other economies within the European Union through the minimum effective tax directive.

I note the decision of the US Administration in relation to the OECD agreement and the presidential memorandum issued on 20 January. This is of course a regrettable decision, but opportunities exist to engage with the new administration to explore a path forward. The Deputy asked how we will do that. The best framework for doing that continues to be inside the OECD. I very much hope President Trump's Administration can see the benefits of an organisation like that which contains so many developed economies across the world. The second, very brief, point is we should continue to strengthen our participation in the OECD through the work of the European Union. These are the kind of issues we will be discussing in Brussels on Tuesday in particular.

Pearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I thank the Minister. I am going to park pillar 1 because it never came into effect anyway and we have not transposed it into legislation. If we look at it from a financial point of view it was not in our interests and if we look at it from a global point of view it was good to have an agreement internationally.

Pillar 2 is a serious problem for us because it is now in our domestic law and companies are preparing for the 15% minimum effective tax rate, which I completely and utterly support. Those companies are probably asking whether that tax rate is going to apply and can this deal go ahead without American involvement. I agree with the Minister’s point we need to try to bring America back into the fold and discuss this, but my question is whether he or the Department are looking at that legislation and how it would apply if America stays with its current position. Our legislation means this State will potentially have to collect taxes from American companies that never operated here and never employed anybody here just because they have a subsidiary here. That is a serious problem for this deal. The interest is to get the Americans back in to discuss and negotiate this but if that does not happen what preparations are we making and what is the timeframe we need to deal with?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Our intent very much is to engage with the United States with a view to making the case to it for continued participation in the OECD framework. That is the outcome we will seek to achieve. I fully acknowledge the difficulties that will be there with regard to that given what President Trump and the Department of the Treasury have already indicated. Are we looking at what the consequences of other outcomes could be? We are considering that, but I must be frank with the Deputy that it is very early days in terms of trying to be clear what the United States may well do. Given we are going to be involved in a very important engagement with it, it is important for me to emphasise the value of the US being in this framework. The Deputy is correct that because this is an agreement that is implemented on a per-jurisdiction basis and we have a commitment that is now in our law to implement the 15% rate that will of course have consequences for companies that are inside the framework and indeed for competitiveness as well. I will update the Dáil and answer questions from Members on this issue as it unfolds, but given the uncertainty about it that is the strongest message I can deliver at the moment.

Pearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I thank the Minister. I agree it is early days and we will have to see. President Trump has made statements that seem to be a negotiation stance, so we definitely need to have those engagements at a European level and a domestic level to see how this will play out. Obviously pillar 1 and pillar 2 had a net reduction in our corporation tax. The implementation of those reduced the corporation tax the State would bring in and therefore the non-application of it would have the reverse effect, but there could be other consequences.

The United States Administration has also threatened to use section 891, which allows for the executive authority to deal with discriminatory extraterritorial taxes if it believes a jurisdiction is impacting on American multinationals moreso than anywhere else. Given the dependence on American multinationals here and the number of them that will be paying the 15% tax rate compared with others, is there any concern about this measure being used against Ireland? What engagement have we had with the US Administration up to now at a domestic level, as opposed to+ a European level, which is also important?

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Any engagement with the new US Administration has been constrained by the fact that it is only making appointments at the moment. That has been the key issue. The new Secretary of the Treasury had his appointment ratified a number of weeks ago.

Many of the other officeholders within the US Treasury, however, with whom both we and Europe will deal, are in the very early days of coming into office. I expect there will be engagement between ourselves and the US in the weeks and months ahead. There will of course be engagement at an EU-US level, in which we will be involved. The Deputy asked whether there would be consequences for us if America were to take certain actions as a result of the implementation of this agreement. The answer to that question is "Yes." Overall, if America continues to see the merit - and I believe it will - in the value of strong exports on its economy in a stable tax environment in the world, I will make the case to it that it is also in its interest. In the early days of this process, making the case for the OECD and for a stable tax framework is an essential message for governments like ours to deliver.

Pádraig O'Sullivan (Cork North-Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Gabhaim buíochas leis an Aire. Bogfaidh muid ar aghaidh anois go dtí Ceisteanna Eile.