Ireland, the European home of tech giants like Apple and Google, is looking to reach a compromise over global taxation that recognizes “the role of legitimate tax competition,” the country’s finance minister told CNBC on Friday.
Ireland is known for offering a low corporate tax rate, 12.5%, and a recent agreement among the seven most advanced economies potentially challenges that.
The G-7 finance ministers agreed this month that there should a minimum global corporate tax rate of 15%, as suggested by the Biden administration, as they try to resolve calls for a fairer tax system.
“What we are going to do is engage in the OECD process very intensely across the coming weeks and months, and I do hope an agreement can be reached that does recognize the role of legitimate tax competition for smaller and medium-sized economies,” Irish Finance Minister Paschal Donohoe told CNBC.
The G-7 plan is under discussion at the OECD level and will be discussed by the G-20 leaders. The idea is to get as many countries as possible to back the proposal so there is a higher chance of it being implemented.
“We still have some time to go before a final agreement is reached, and so it is difficult for me to say what that compromise could yet look like. But I do believe it is in the interest of everybody to find a compromise,” Donohoe told CNBC’s Annette Weisbach in Luxembourg.
The European Commission rule in 2016 that Apple had received illegal tax benefits in Ireland and ordered Dublin to recoup 13 billion euros ($15.49 billion) from the tech giant. Ireland and Apple contested the decision, and the case is now being reviewed by Europe’s highest court.
Taxation has become particularly important in the wake of the Covid pandemic, given that many countries are desperate for new or stronger sources of income so they can repay the debt incurred during the crisis.
The European Union raised 20 billion euros earlier this week through a 10-year bond sale as part of a wider 800 billion euro stimulus plan. This was the first time that the European Commission tapped the markets on behalf of the 27 EU nations, and it proved attractive among investors, given that it was over seven-times oversubscribed.
“In a nutshell, I expect the first disbursements to take place in the second half of July,” EU Budget Commissioner Johannes Hahn told CNBC on Thursday about when the money borrowed from the markets will start to arrive at the individual EU nations.
Ahead of the first disbursements, the commission has already approved some of the recovery plans — the documents where countries have outlined how they will use the funds. This is the case of Portugal, Spain, Greece, Denmark and Luxembourg. More approvals are expected in coming days.
“There has been some criticism that we were rolling out the program too slowly in Europe, but in fact it is because the European Commission, and we all want, as member states, that the money is used for the right purposes,” Luxembourg Finance Minister Pierre Gramegna told CNBC on Friday.