The EU’s Economy Commissioner has said he is confident there is “a chance to find a shared way” that would see Ireland sign up to a global tax agreement that would see the corporate tax rate increase to 15%.
Paolo Gentiloni told Morning Ireland that he knows how challenging the issue is for Ireland.
The Commissioner said his visit is not intended to put pressure on the Government but to “respectfully discuss” the importance of the potential agreement with the Minister for Finance Paschal Donohoe.
He said that it is very difficult to imagine a global tax agreement a year ago, but that global rules are changing after the Covid-19 crisis and the change in the US administration.
The global agreement is intended to “bring stability and fairness to the system,” he added.
Mr Gentiloni said he is convinced “that the attractiveness of the Irish economy is not based on a small difference in the corporate tax rate”.
He said it is “part of the picture” but added that there are several other competitiveness factors in Ireland’s favour.
These include the high level of education within the labour force, the English-speaking workforce and the attractive business environment.
When asked what would the implications be for Ireland if it did not join the global tax agreement next month, the EU Commissioner said that countries have the right to make their own decisions and he did not want to speculate on scenarios that could be avoided.
Paolo Gentiloni said it is in the interests of the Irish economy to have a stable, predictable and fair global system without any loss of the possibility of competition on tax regimes.
“Of course it is in the interest of the global community of the European Union, of the US to reach this agreement. But at the end of the day I think it’s also in the interest of the Irish economy,” he stated.
He added that large differences on tax rates will remain between different jurisdictions.
Paolo Gentiloni said the OECD is leading the negotiation and trying to reach agreement in time for the G20 meeting next month.
He added that the possibility of a deal is there because of the decision of the US administration, and without US support “the deal will not be there”.
Mr Gentiloni also said today that Covid-related debt is a very big issue and he is counting on the co-operation between the Commission and foreign ministers.
He said that mistakes made during the previous crisis when victory was declared too soon and which resulted in a second recession cannot be made.
He told Morning Ireland that the level of debt should be reduced in the coming years but it should be done gradually and without tightening economies too quickly.