The Irish Times view on corporate tax changes: Ireland faces defining choices

It is not credible that Ireland could stay outside an international accord

The discussion on the future of corporation tax has reached a delicate point. Minister for Finance Paschal Donohoe had further discussions with US Treasury Secretary Janet Yellen on Wednesday, in which she underlined to him the once-off opportunity now arrived at to reform the international system for taxing big businesses. The pressure, in other words, is being turned up on Ireland.

Government Ministers have underlined this week that Ireland wants to find a way to sign the agreement. Better, as Tánaiste Leo Varadkar put it, to be "inside the tent". But certainty is an issue, notably on what exactly the global minimum tax rate will be and whether the United States Congress can pass legislation which would parallel the main provisions of the global deal.

The timing here is complicated, with no guarantee that there will be clarity on what will get through Congress before key Organisation for Economic Cooperation and Development (OECD) meetings in October. And in turn if the key pieces of legislation get bogged down in Congress, it is not clear whether the OECD process will stall.

Agreement is overdue, of course, and would help to close off a lot of the opportunities which big multinationals have taken to cut their tax bills. Part of what is going on is also an argument about where companies pay tax, as well as how much they pay. Negotiators call for reform in public, while in private they fight to protect their own patch and their own exchequer.


Depending on how this plays out, Ireland may soon face some defining choices. It is not credible that Ireland could stay outside an international accord and it is clear that the Government has been preparing the way for a possible change. However it will want clarity on what is it signing up for, notably in relation to the exact minimum rate – so far defined only as “at least 15 per cent”.

Political capital is being used up in this battle. Ireland’s tactics will probably be soon forgotten if the country does sign up to a deal in the months ahead. But awkward judgments lie ahead in how to manage the end game. Overplaying Ireland’s hand – which is not particularly strong – remains a real risk.

The next few weeks are likely to tell a lot. Either the OECD deal will take on a fresh momentum, boosted by events in the US, or a hold-up in Congress will create further delays.

While signing up to a deal brings challenges, for Ireland the prospect of no agreement could be worse. In this scenario countries will try to achieve the same results on a unilateral basis, tensions between the European Union and US are possible – with Ireland caught in the middle – and the EU could try to revive its own tax reform agenda. As it has been from the start, for Ireland this is an exercise in damage limitation.