Ireland’s cornerstone low-tax policy, which has enticed global corporations including Google and Facebook, to base their European headquarters here is to go after 18 years in situ.
The decision follows months of wrangling over the fine print of an OECD agreement to operate a 15% tax rate in more than 140 countries around the globe.
Ireland was initially one of nine countries that refused to join the scheme, but on Thursday the cabinet signed off on a deal before a wider OECD announcement due Friday at 6pm.
It ends the 12.5% tax rate that has applied since January 2003, which angered critics in other EU countries where higher tax rates have applied. The new arrangements, which will be limited to companies earning more than €750m globally a year, will come into force in 2023 and cost the exchequer between €800m and €2bn as per estimates.
The government said 56 Irish multinationals employing 100,000 staff and 1,500 foreign multinationals employing 400,000 will be impacted.
Minister for Finance Paschal Donohoe said its the right decision; “I’m absolute convinced that our interests are better serviced within the agreement.
Donohoe confirmed Dublin had succeeded in getting the phrase “at least” out of a July draft pledge for a tax of “at least 15%”, which raised fears of more rate rises in the pipeline.
He also confirmed that Ireland could continue to apply a 12.5% tax rate for companies that generate less than €750m a year globally.
Ireland estimated 1,000 multinationals in the tech, finance and pharma sectors including the likes of Pfizer, Intel, Yahoo, LinkedIn, TikTok, Apple, IBM, and Twitter all took full advantage of the tax rate.
Such is these multinationals’ importance, the revenue commissioners figures in May showed that just 100 companies accounted for almost 80% of the tax revenue.