When the Paris-based the Organisation for Economic Co-operation and Development (OECD) started work on reforming the global tax system back in 2016, Ireland was in the eye of a storm over multinational tax avoidance.
More than most countries, we were considered as having facilitated a series of so-called sweetheart deals with big tech companies that allowed them avoid billions in tax. Apple's Irish subsidiary, Apple Sales International, paid an effective tax rate of just 0.005 per cent in 2014.
Ireland was tagged as a tax haven, and needed to be seen to be doing the right thing, namely abolishing loopholes such as “the double Irish” and jumping on board the reform agenda.
Cynics will say its willingness to support OECD’s process while resisting the EU’s more aggressive reform agenda on digital taxation was predicated on the hope that the OECD’s one would struggle to reach consensus and result in little or no change.
Now it seems, against all the odds, the OECD's project is bearing fruit. The think tank is said to be confident of getting the support of G20 finance minsters when they meet to discuss the proposals in Washington DC next week.
Reform of current rules was always going to result in a hit to Ireland’s corporate tax base – the question is how big a hit? Based on the bargaining positions of major players such as the US and the UK, employers’ group Ibec believe about 10 per cent of our corporate tax receipts are at risk.
On the basis of last year’s tax take, that equates to €1 billion, probably not a bad price to pay for what the OECD calls “tax certainty” and in the context of the outcry over the current arrangements. Many had feared it would be much larger.
The US plays both sides of the tax game, representing larger countries that lose out to smaller, low-tax jurisdictions like Ireland while simultaneously supporting big tech, most of which emanates from the US, and crying foul whenever a country like France threatens to get tough on corporate taxation.
This aids Ireland’s cause and will hopefully keep the slice of the profits to be reallocated elsewhere to manageable proportions.
