Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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209. To ask the Minister for Finance the full-year revenue that would be generated by increasing the corporate tax rate to 20% and 25%; and if he will make a statement on the matter. [30992/23]

Michael McGrath (Cork South Central, Fianna Fail)
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Ireland’s corporate tax regime has been built on certainty and predictability, and the 12.5% corporation tax rate on trading income has been a cornerstone of that regime for over 20 years. This stability has enabled companies to plan long-term investments in Ireland, generating employment and increasing economic activity.

The Deputy will be aware that Ireland signed up to the OECD Two Pillar agreement in October 2021, including the agreement of a global minimum effective rate of 15%, on a jurisdictional basis, for in-scope entities. Work is ongoing with a view to introducing the necessary legislation in Finance Bill 2023, and the Deputy may be aware that a Feedback Statement containing draft approaches to key parts of the necessary legislation was published in March.

Ireland will continue to be able to offer a 12.5% rate for businesses out of scope of the agreement, i.e. businesses with revenues less than €750m. This means that over 95% of companies operating in Ireland are outside of the scope of the global minimum effective tax rate of 15% and they will continue to be taxed at the 12.5% rate.

On a straightforward, mathematical basis there would be a large theoretical yield from increasing the 12.5% trading rate of corporation tax to 20%. However, as has been demonstrated in research published by my Department and the ESRI, it is likely that such changes would lead to lower levels of economic activity and behavioural changes in the investment decisions of multinational companies. It is likely that this would result in lower employment in the multinational sector, leading to reductions in tax revenues across a number of tax heads. Therefore, it is not possible to accurately or robustly estimate the potential yield from an increase in the corporation tax rate as proposed by the Deputy.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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210. To ask the Minister for Finance the full-year revenue that would be generated by imposing a minimum effective corporate tax rate of 15% on pre-tax gross trading profits before deductions, reliefs and allowances and assuming no behavioural change; and if he will make a statement on the matter. [30993/23]

Michael McGrath (Cork South Central, Fianna Fail)
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The trading profits of companies in Ireland are generally taxed at the standard corporation tax rate of 12.5%. Some of the main features of the current corporation tax regime are its simplicity and that it applies to a broad base. Changing this rate (or imposing additional levies on corporate profits) would involve increased complexity and could change the attractiveness of Ireland's corporate tax offering.

It is my understanding that the Deputy is referring to the gross trading profits of companies data which is released annually by Revenue. As with individual income taxpayers, companies can use net credits, deductions and reliefs against their profits to reduce taxable income or CT payable. For example, companies are entitled to capital allowances in respect of certain expenditure and these can be set against profits and, where a company has losses or carries forward losses from a previous accounting period (subject to conditions), these can be used to offset against its CT liability in a variety of ways. Loss-relief is a standard feature of corporation tax systems in most OECD countries. It recognises the fact that a business cycle runs over several years and that it would be unfair to tax income earned in one year and not allow relief for losses incurred in another.

In October 2021 Ireland, along with almost 140 other countries in the OECD/G20 Inclusive Framework, signed up to an historic agreement to reform the international tax framework as it applies to large corporate groups. Building on the original Base Erosion and Profit Shifting (BEPS) project, the agreement contains a two-pillar solution to address the tax challenges arising from digitalisation and globalisation. Recognising how multi-national enterprises (MNEs) across the globe now operate commercially and generate value, this significant reform will ensure that the international tax framework keeps pace with these developments in a coordinated way.

Pillar Two of the agreement will see the adoption of a global minimum effective tax rate of 15% applying to multinational companies with global revenues in excess of €750m. Ireland will retain its 12.5% corporation tax rate on trading profits for the 95% of companies in Ireland that are out of scope of the agreement.

Pillar Two will be implemented in Ireland largely via the EU Minimum Tax Directive, which was agreed in December 2022 and has a transposition deadline of the end of 2023. Work on implementing the Directive is well underway in my department.

It is important to recognise that the minimum corporate tax rate is only one element of the OECD Two Pillar agreement. Any projected changes to corporation tax yields following implementation must also take into account Pillar One, which provides for a reallocation of certain profits to market jurisdictions. An initial estimate of the potential cost of implementation of both pillars of the OECD agreement in terms of reduced tax receipts was published in 2020 as being potentially in the region of €2 billion per annum - approximately 20% of CT revenue at that time. This remains as the estimate used for budgetary purposes currently as it continues to be very difficult to accurately estimate the full impact while so many aspects of the OECD agreement remain undecided.