Written answers

Tuesday, 27 July 2021

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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411. To ask the Minister for Finance his engagements regarding the EU digital tax; and if he will make a statement on the matter. [40978/21]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I assume that the Deputy is referring to the Digital Levy.

In 2020, the European Council invited the European Commission to bring forward a proposal for a digital levy in 2021 in the context of Own Resources to assist in the funding of the EU budget. It is my understanding that it was the intention of the European Commission to bring forward such a proposal this month. However on 12 July, the Commission announced that it was putting the work on the digital levy on hold in the context of the ongoing discussions at the OECD on addressing the tax challenges of digitalisation and globalisation.

Ireland will consider the merits of any such proposal when a proposal is made. However, it is important for the EU that any proposal avoids raising trade tensions and does not undermine the ongoing OECD discussions.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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412. To ask the Minister for Finance the Government’s plans in relation to proposed changes to the international corporation taxation rules regarding the warehousing of profits; the projected costs and changes these will entail; and if he will make a statement on the matter. [40979/21]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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My understanding is that the Deputy's question relates to changes to the international tax framework proposed recently at OECD.

In this context, you may be aware that on 1 July 2021, the OECD Inclusive Framework reached agreement, but not consensus,on key aspects of the two-pillar solution to address tax challenges arising from digitalisation and globalisation. Pillar One proposes a re-allocation of a proportion of tax to the market jurisdiction, while Pillar Two seeks to apply a global minimum effective tax rate.

Ireland is supportive of the Pillar One proposals to re-allocate a proportion of taxing rights to market countries, recognising that the international tax framework must evolve to accommodate changes in how business operates in today’s digitalised economy. There will be a cost to Ireland for this in terms of reduced corporation tax receipts but, overall, Pillar One will bring stability and certainty to the international tax framework and will help underpin economic growth from which all can benefit.

I have been very clear that Ireland is broadly supportive of the agreement but I signalled a reservation in the respect to a commitment to a rate of ‘at least 15%’ for a global minimum effective tax rate. As a result of this reservation, Ireland was not in a position to join the OECD Statement.

I have consistently said that Ireland wants to be part of the agreement at OECD. However, any agreement must bring certainty and stability.

Given the economic significance of the OECD proposals to Ireland, it is important that there is a dialogue within our political system, with stakeholders and with citizens in respect to these proposals. In that regard, I launched a Public Consultation on the proposed OECD agreement on 20 July.

Interested parties are invited to respond to this consultation on Ireland’s approach to the international tax proposals being discussed at the OECD/G20 BEPS Inclusive Framework and, specifically, in relation to how our approach and those proposals can continue to support economic growth and prosperity.

The consultation period runs until 10 September 2021 and details of how to engage are available on the Department of Finance website.

While there is broad high level agreement on key components of a two-pillar solution, there remain a number of critical aspects of both pillars which have yet to be settled. Department of Finance officials previously estimated that the cost to the Exchequer of the OECD reforms may be up to EUR 2 billion annually which is proximately one fifth of corporate tax revenues. This is the estimate included in the Stability Programme Update published by the Department in April to apply from 2025.

However, It is very difficult at this point to provide an update to this estimate given the complexities and many open issues which are still to be resolved at the OECD in the months ahead.

Nevertheless, I remain committed to the OECD process and aims to find an outcome that Ireland can yet support. Ireland will continue to play our part in reaching a comprehensive, sustainable and equitable agreement.

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