Rose Conway-Walsh (Mayo, Sinn Fein)
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159. To ask the Minister for Finance the level of impact built into the revenue projections in the stability programme update from OECD Pillar 2; and if he will make a statement on the matter. [24511/24]

Rose Conway-Walsh (Mayo, Sinn Fein)
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160. To ask the Minister for Finance the level of impact if any built into the revenue projections in the stability programme update from OECD Pillar 1; and if he will make a statement on the matter. [24512/24]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 159 and 160 together.

In October 2021, Ireland, along with more than 135 other countries, signed up to the two-pillar solution to address the tax challenges arising from digitalisation.

Discussions remain on-going at the OECD on a number of key elements of Pillar One which, once agreed, would involve a portion of taxable profits from Irish-based multinationals being reassigned to other jurisdictions and, accordingly, a loss of tax revenue.

For Pillar Two, the EU Minimum Tax Directive was transposed into Irish law in Finance (No.2) Act 2023 giving effect to the new rules from the end of 2023. This means that a minimum effective corporate tax rate of 15 per cent will apply to the profits of ‘large’ enterprises – those whose annual turnover exceeds €750 million – from this year which is expected to increase tax revenue, though it will be 2026 before there is any impact on receipts.

Overall, the net effect of the two-pillar solution on Ireland will be a significant loss of corporate tax revenue.

A first estimate of the net cost of implementation of the overall OECD agreement, i.e. taking into account the loss of tax revenue from Pillar One and expected increase from Pillar Two, was published by my Department in 2020. Annual corporation tax receipts were assumed to decline by €2 billion or approximately 20 per cent of corporation tax revenue at that time. Since then, corporation tax receipts have increased substantially and accordingly, the cost of implementation of the agreement is also likely to have increased significantly.

Estimating the potential impact of the OECD agreement represents a considerable and on-going challenge, not least due to the fact that the negotiations are still ongoing. Given the uncertainty at this stage, the original assumption was retained in the Stability Programme Update with a net loss of €2 billion from both pillars of the agreement incorporated from 2026 onwards.

As negotiations progress and more detail emerges, my Department will publish revised estimates of the impact on the public finances.