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Big investment hubs dodge a bullet in global tax overhaul By Reuters

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© Reuters. FILE PHOTO – Commuters walk to work each morning in Dublin’s financial district, Ireland. October 18, 2018. REUTERS/Clodagh Kilcoyne

Padraic Hutton

DUBLIN, (Reuters) – Ireland has done what was once impossible by agreeing to a 12.5% corporation tax rate. However, it appears that other advanced nations are determined to divide up foreign direct investments.

Friday saw 136 countries agree to the first major revision in the history of rules for taxing multinationals. These measures included a minimum global rate of 15% that is intended to discourage these companies from making profits in low-tax countries.

The deal was made possible by Ireland dropping its opposition just before it became law. Many developing countries feel their concerns have been overlooked, and Oxfam calls the deal “a rich country patch-up”.

Martin Shanahan, head of IDA Ireland (the state investment agency that convinced Apple (NASDAQ)), Facebook and other major companies, said, “We will continue competing with largely similar jurisdictions.” Pfizer (NYSE: ) in order to establish European headquarters within the country with just 5 million inhabitants.

Future technology leaders could be added to this list, but it is likely that they will face off against London and Berlin. Switzerland and Singapore will be the most formidable competitors for pharmaceuticals and medical equipment.

Shanahan also mentioned that Spain and Eastern Europe have been more competitive recently in the search for multilateral investments, which directly accounts for 1 in 6 Irish jobs.

DEAL “SHAMEFUL”.

Many countries in these rival nations have corporate tax rates higher than Ireland’s 12.5% current rate, and the incoming global minimum of 15%. Dublin believes that low taxes are not enough to attract investments. This is despite Ireland’s highly educated workforce as well as its membership in the European Union.

Sendoso, an American online gifting site, announced the establishment of a European headquarters in Dublin. It said that corporate tax is a minor factor and that it did not affect Ireland’s strategic advantage as a country.

Head of Ireland’s National Treasury Management Agency claimed that Stripe was not tax-related when they discussed plans for rapid hires in Ireland. The NTMA, the Irish sovereign wealth fund that the NTMA manages invested in the latest round of funding for the U.S. startup in March.

However, countries with low taxes could have had a much worse outcome. Although the United States was the first to demand a minimum 21% rate, the July draft OECD agreement settled for “at least 15%”.

Dublin was determined to get rid of the “at minimum”. After achieving success, the government stated that they had created the right business climate to attract investment.

Peter Vale from Grant Thornton, an Irish tax partner, said that if we had a rate of “at least” 15% it would have caused a lot more uncertainty regarding the attractiveness and could have limited investment.

We played strong and it ended well, I believe.”

Development countries have been angered by the effective preservation of status quo, even though multinationals make more from their profits.

Martin Guzman (Argentine Economy Minister) stated on Thursday that the proposal forced countries in developing economies to make a choice between something good and worse. Argentina had not signed the original version of the agreement.

Susana Ruiz (Oxfam Tax Policy Lead) said, “It’s shameful that the legitimate worries of developing countries are ignored while countries such as Ireland with low taxes are able to reduce the already limited aspects” in a statement.

The proposal to fix a global rate at 15% will be greatly favored by rich countries. It will also increase inequality.

Ireland understands how slow it takes for them to catch up. Ireland, which was home to Apple founder Steve Jobs in 1980 when it opened its first European plant, had a low unemployment rate of 17% as recently as 1980.

Shanahan from IDA Ireland said that “We opened up our economy in the 1950s” and that before then we had been inward-looking, protectingist, and poor.

It takes time to develop the ability and offer.

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