Taxes will finally go up for big tech in Europe: Ireland twists its arm to bring them to 15% (with some conditions)
Europe has overcome an important obstacle to harmonize the taxation of its member countries against large technology: late this Thursday, Ireland has agreed to join the international agreement that aims to establish a global tax of 15% on the profits of multinationals with a turnover of more than 750 million euros per year, as reported by the Irish Government’s Finance Department in a statement.
So far, Ireland taxes the activity of these large companies with 12.5% of their annual profits, which made it one of the countries with the lowest taxes in the world and has contributed to the fact that large technology companies such as Facebook, Google or Apple, among others, have established their tax headquarters in Europe there to pay lower rates than those that they would have to disburse in any other Member State.
Ireland has accepted this rise to join the international pact promoted by the Organization for Economic Cooperation and Development (OECD) in July, in which 140 countries around the world They agreed that large multinationals had to pay 15% taxes in the territories where they generate business, instead of only where they have their fiscal headquarters. The European Union thus benefits from the global pressure exerted on the Irish, who have been resisting accepting measures of this type proposed by Brussels for years.
Now, however, Ireland has been forced to agree to not to be left out of the discussions that take place within the OECD, which would cause it to lose influence in major international economic decisions.
However, that of the Irish is a concession with important conditions. In the first place, to accept it, they have negotiated and got the OECD to eliminate from the text that the agreement will imply a tax rate of “at least 15%”. Ireland understood that this “at least” could compromise them too much in the future in possible tax reforms, so he tightened the rope with the international economic organization and has managed to erase the tagline.
“The agreement establishes that the minimum effective rate for multinationals with an annual turnover of more than 750 million euros is 15%. We have ensured the removal of the ‘at least’ in the text. This provide fundamental certainty for government and industry and provide long-term stability and certainty to companies in the context of investment decisions, ”says Paschal Donohoe, Irish Finance Minister, in the note.
On the other hand, Dublin would also have achieved the commitment of the European Union not to go beyond the OECD agreement in the directive that prepares to tax the benefits of large technology in the Old Continent. That is Brussels will not establish a corporate tax of more than 15% for multinationals with an annual turnover of more than 750 million euros that generate business in community territory.
For the rest, with regard to companies that do not fall within this agreement, that is, multinationals with a turnover of less than 750 million euros per year, Ireland will continue to apply a corporate tax of 12.5%, the second lowest in the EU and ten points below the community average, according to the latest report from the Tax Foundation.
“For more than 160,000 companies in Ireland with a turnover of less than 750 million euros per year, employing approximately 1.8 million people, there will be no changes in the corporate tax rate 12.5%, ”said Donohoe.