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Modern buildings and offices are seen on the bank of the Liffey river in Dublin, the capital and largest city of Ireland. Photo: Shutterstock

New global tax regime won’t push Big Tech companies out of Ireland

  • The 15 per cent tax rate proposed by the Group of Seven rich nations is higher than Ireland’s current 12.5 per cent levy for businesses
  • Ireland has become the base of European operations for several of the world’s largest tech companies, including Google, Apple and Facebook
Big Tech companies and other industries that have bunkered down in Europe’s tax havens are unlikely to shift their bases under the proposed global minimum tax regime, as markets like Ireland still offer more corporate perks than wealthier neighbours.
While the 15 per cent tax rate proposed by the Group of Seven rich nations is higher than Ireland’s current 12.5 per cent levy for businesses, it is still below the 20 per cent or more companies would face in countries like the United States or France.

Ireland also has tax treaties with other nations that allow multinational businesses to pay a lower rate and incentives to compensate companies for research and development spending. If new legislation does not address the other perks tax havens offer Big Tech companies, they could maintain a lot of their advantages.

Some companies may move their headquarters out of low-tax countries like Ireland, but “there’s still a lot of incentives to keep your company and your money in those lower tax jurisdictions,” said Robert Palmer, executive director of advocacy group Tax Justice UK. Still, the ruling is a positive step toward ending the “race to the bottom” for corporate tax rates, he said.

Technology giants Apple, Facebook, Google and have largely supported efforts to update international tax rules. Photo: Reuters

Ireland has become the base of European operations for several of the largest international companies, including Google, Apple and Facebook. The G7’s minimum tax proposal aims to stop companies from using low-tax jurisdictions to cut their tax bills, and countries from competing to offer ever-lower rates.

The major technology companies themselves have largely supported the efforts. Google strongly supports the work to update international tax rules and “we hope countries continue to work together to ensure a balanced and durable agreement will be finalised soon”, spokesman José Castañeda said in an emailed statement.

An representative said the Organisation for Economic Cooperation and Development-led process “will help bring stability to the international tax system” and described Saturday’s deal as a “welcome step forward in the effort to achieve this goal.”

Facebook’s global affairs vice-president Nick Clegg made similarly positive remarks on Twitter.

Britain's Chancellor of the Exchequer Rishi Sunak (top, centre left), US Treasury Secretary Janet Yellen (top, centre right), Italy's Economy and Finance Minister Daniele Franco (bottom left) and Germany's Finance Minister Olaf Scholz (bottom right) gathered last week at the Group of Seven Finance Ministers Meeting, held at Lancaster House in London, to hammer out an agreement on corporate tax harmonisation. Photo: Agence France-Presse

A representative for Apple declined to comment on the effect any new rules would have on its Irish base.

Representatives for Facebook and Google did not immediately respond to requests for comment.

Other industries including aircraft leasing that are based in Ireland in large part to lower their tax bills are also likely to stay put, according to Joe O’Mara, head of aviation finance at KPMG Ireland.

O’Mara said the country has “best-in-class” agreements to reduce withholding tax on the rental payments that Irish-based lessors receive from their airline customers.

Without these treaties, the companies could suffer a withholding tax – typically about 10 per cent to 30 per cent – on their gross income from leases, he said.

G7 nations reach landmark deal to overhaul global tax on tech firms

That is good news for Ireland, which has warned a global agreement could cost it about 20 per cent of its corporate tax revenues.

Ireland’s finance minister, Paschal Donohoe, has argued that tax competition is a legitimate tool for smaller countries that do not have the same resources as larger ones, and has pledged to find other policy areas to ensure the nation remains a “very attractive place” for international investment.

More at risk, are tax havens like Bermuda where companies pay no tax, according to George Turner, executive director of TaxWatch.

“The zero per cent tax havens like Bermuda, I think that game’s over,” he said.