An updated draft of a global corporate tax overhaul has dropped “at least” from a proposed minimum rate of “at least 15 per cent”, possibly clearing a major hurdle for Ireland as negotiations enter a final stretch, sources have told Reuters.
Some 140 countries aim to finalise the first major overhaul in a generation of the rules for taxing multi-nationals at a meeting on Friday so the deal can be endorsed by the Group of 20 economic powers later this month.
Until now 134 out of 140 countries in the talks had backed a minimum rate of “at least” 15 per cent, but Ireland has so far refused to sign up over concern the rate could end up being higher than that.
Settling on a rate of 15 per cent would likely clear the way for the Government to sign up.
As the low-tax European home for a number of the world's largest multinationals, Ireland is seen as the key holdout in the negotiations.
One source familiar with the state of the talks told Reuters that the latest text circulated to delegations had cut “at least” and another said that 15 per cent was virtually a “done deal”.
The agreement does not need to be unanimous, but countries could apply a top-up tax to the 15 percent minimum on profits booked in the countries that do not back it.
Blocking point
French Finance Minister Bruno Le Maire, who has pushed for a higher rate than 15 per cent, said on Tuesday that a compromise was possible on 15 per cent.
However, he added that a major blocking point remained over how big a deduction from the global minimum should be possible for multinationals based on their assets and payroll in foreign markets.
"It's not the rate that is the biggest problem, Ireland's position is evolving on this subject and a compromise can emerge at 15 per cnt as the real effective minimum taxation," Le Maire said.
The minimum rate is supposed to discourage multinationals from booking profits in places like Ireland, where the corporate tax rate of is 12.5 per cent.
However, some countries such as Poland and other eastern European countries want a large deduction from minimum rate to reflect real corporate activity because they frequently offer reduced rates to entice foreign investors to build plants.
Le Maire said France supported a deduction that would be based on 7.5 per centfor assets and 10 per cent for payroll over a 10-year transition period.
Once an agreement is reached then governments would be expected to bring the new rules onto their statute books next year so that they take effect in 2023.
