OECD tax deal aims to address US concerns
Ireland has welcomed an agreement reached by 147 countries on a package of measures covering the operation of a global minimum tax for multinational companies.
The 15% minimum tax, known as pillar two, was a key part of an OECD agreement on international tax reached in 2021.
The Department of Finance said that the package aimed to strike a balance that resolved US concerns about the minimum tax, while preserving the original objectives of pillar two.
The ‘Side-by-Side' agreement announced yesterday (5 January) includes three main elements:
- A ‘side-by-side' system, setting out rules to facilitate existing minimum-tax regimes,
- Simplification measures, and
- Alignment of rules on tax incentives.
EU assessment
The package also provides for a ‘stocktake’ exercise that commits countries to a review of the side-by-side system in 2029. This will be accompanied by a European Commission assessment of the system’s effect on EU competitiveness.
Tánaiste and Minister for Finance Simon Harris said that the package had been “carefully negotiated” in response to US concerns.
“Ireland joined the global consensus in agreeing a side-by-side system that acknowledges the robustness of both the US tax system and the global minimum tax, while preserving the original objectives of the OECD international tax agreement,” he stated.
Deal ‘to preserve gains’
The OECD said that the deal would set the foundation for stability and certainty in the international tax system.
“It will preserve the gains achieved so far in the global minimum tax framework and protect the ability for all jurisdictions, particularly developing countries, to have first taxing rights over income generated in their jurisdictions,” the organisation said.
The agreement states that a co-ordinated tax based on a common approach should be the main method of ensuring minimum taxation.
It also recognises, however, that that some jurisdictions “may already have implemented a tax regime that incorporates minimum-taxation requirements with respect to the domestic and foreign income of MNE groups [multinationals] headquartered in that jurisdiction”.