Goodbody Stockbrokers has today warned that new corporate tax proposals from the US government could have serious consequences in Ireland's efforts to attract foreign direct investment.
This comes as Treasury Secretary, Janet Yellen yesterday laid out the very different approach to international relations that would be adopted by the US under President Biden. The US will reengage with the rules-based international order that involves multilateral cooperation on the number of issues around trade, finance, the environment, and taxation.
Following last week’s announcement on the plans to finance its huge infrastructure plan by raising taxes on multinationals, Yellen confirmed US plans to engage internationally on a global minimum tax rate. Agreement on such a proposal would, in Yellen’s view, end a “thirty-year race to the bottom” on corporate tax rates.
Given the role that multinationals play in output, employment, and tax revenues in Ireland, Goodbody say changes to the rules governing the taxation of multinational corporations will have vitally important implications. They say Ireland is home to a significant amount of intellectual, human, and physical capital, but has long accepted that it would lose corporate tax revenue under changes proposed under Pillar I. Goodbody say Pillar II is a larger threat to Ireland’s efforts to attract multinationals through legitimate tax competition.
According to Goodbody Stockbrokers, "Ireland has been unapologetic in using its low corporate tax rate as an incentive for footloose industries to locate their operations here for decades. The further the global minimum tax rate moves away from Ireland’s headline corporation tax rate of 12.5%, the less incentive the low rate offers. Other features, such as access to the large EU market, are also vitally important and will become even more so as these new rules are rolled out. A renewed focus on these other attributes, particularly in the areas of human and physical capital is now required."