Michael McGrath (Cork South Central, Fianna Fail)
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The Deputy will recall that a Government decision was taken for Ireland to sign up to a global agreement on a two-pillared solution at the OECD Inclusive Framework to address the tax challenges associated with the digitalisation of the economy in October 2021. Pillar Two of that agreement sees the implementation of a global minimum tax of 15%. This decision was not taken lightly and came on the back of a broad public consultation process that sought the views of interested parties, including stakeholders from the business community.

It is important to recall the very real and substantial risks associated with potentially staying outside the OECD Agreement. As a small and open economy we have strong ties with the EU, US and other G20 countries and it remains essential for our long term competitiveness to ensure that we are remain in line with key partners.

At EU level, the Minimum Tax Directive has been agreed by all EU Member States. The directive ensures that there is a consistent application of Pillar Two of the OECD agreement across all Member States. Therefore, all EU Member States are legally bound to transpose the EU Minimum Tax Directive, and bring the primary rules into effect, by 31 December 2023.

The GloBE rules are a series of three interlocking rules designed to ensure the application of a 15% minimum effective corporate tax rate globally. It should be noted that there is also a specific rule order in respect of these rules which has been agreed at the OECD. This is salient in relation to the Undertaxed Payments Rule (UTPR) safe harbour which you have expressed concerns about.

The UTPR is designed to operate as a backstop to the IIR which itself comes after the QDTT in the globally agreed rule order. The UTPR enters into force a year later than the QDTT and the IIR to allow those rules an opportunity to bed in prior to the introduction of the backstop rule. The UTPR will be important in ensuring that the minimum tax is applied consistently across the globe.

A transitional UTPR Safe Harbour has been developed at the OECD. This will provide that, where the ultimate parent entity (UPE) of an MNE is located in a jurisdiction that has not implemented Pillar Two rules, and where that jurisdiction applies a domestic corporate income tax rate of at least 20%, the UTPR does not apply in respect of the UPE and any other group entities in that UPE jurisdiction.

These rules have been designed to mitigate complexity and disputes for businesses and tax administrations alike in year one. The safe harbour also recognises the challenges facing jurisdictions globally in implementing Pillar Two by providing a limited additional grace period before the UTPR takes effect.

Ireland will continue to play to the strengths of its wider offering beyond the tax system, a dynamic well-educated English speaking workforce, our common law legal system and business friendly environment, seeking to ensure our continued competitiveness in light of the impacts of Pillar Two implementation.