US PRESIDENT Joe Biden’s corporate tax proposals are relevant to small and medium-sized countries like Ireland, Treasury Secretary Paschal Donohoe said.
As a result, big changes in corporate taxes are to be expected, along with anti-global tax avoidance measures being developed by the OECD, the Organization for Economic Co-operation and Development, he told Dáil’s finance committee.
Biden’s proposals for a 21 percent flat tax on all overseas declared profits of US companies could have “significant effects” on the process under way in the OECD, which is an inter-power negotiation, Donohoe added.
“I believe the Irish tax rate of 12.5 percent is a very stable, competitive and transparent tax rate that I stand behind,” he said.
The question of a global effective minimum tax rate, how high this figure would be and how it would be implemented, are principles that have not yet been discussed in the OECD.
“While President Biden has set out his proposals on these matters, they have not yet been made within the OECD.”
The US team would speak to representatives from other blocks within this body. “During this process, I’ll stand right behind our 12.5 percent tax rate and stand up for legitimate tax competition.”
Jim O’Callaghan, TD of Fianna Fáil, said Mr Biden had just announced a $ 2 trillion program of Covid-19 support spending for the people of the United States and was going to have to pay for it.
“Of course, President Biden can change the law in the US legislature, but he cannot enforce international consensus,” he said.
However, Mr Donohoe said the US was in a position to increase the GILTI on all profits made by US companies overseas, which could have ramifications for Ireland.
Sinn Féin’s finance spokesman Pearse Doherty said the OECD has a process underway of examining an effective minimum corporate tax rate, but Mr Biden’s proposal of 21 percent could result in the OECD rate being higher than that expected.
“Do you think this country is at risk of increased corporate tax rates, or do you think we can be outside of that process if there is an effective minimum tax rate greater than? 12.5 percent agreed at OECD level? “He asked.
Mr. Donohoe replied, “We are attending a hearing. This is not a debate. This is not an academic process. This is a negotiation that will take place in over 120 countries within the OECD.
“The largest countries in this debate, the G7, have clearly spoken out in favor of a global effective minimum tax rate.
“While America was saying what that number should look like, we haven’t seen numbers from other large countries, and we haven’t even seen this principle discussed. let alone negotiated within the OECD.
“The problems you are referring to are not developing right now. The point is, it is a process that we need to be part of.
“Ireland’s tax policy has been influenced by the OECD. Given that we see ourselves as adaptable and important actors in global tax law, it is important that we stay within the OECD framework.”
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