On 20 July 2021, the Irish Minister for Finance, Paschal Donohoe, announced a public consultation on the Organisation for Economic Co-operation and Development (OECD) International Tax Proposals – the two-pillar solution commonly referred to as “BEPS 2.0.”
As background, on 1 July 2021, the OECD Inclusive Framework reached agreement but not unanimous consensus on key aspects of this two-pillar solution. Ireland has outlined its broad support for the agreement but has expressed reservations, particularly in relation to the proposed global minimum effective tax rate of “at least 15%.”
Minister Donohoe has reiterated that he believes that it is in the interest of all countries to achieve an equitable, ambitious and sustainable agreement at the OECD on the international tax architecture and noted that Ireland is committed to playing its part in reaching any agreement.
In this context, the Department of Finance considers it timely to invite interested parties to make submissions on the BEPS 2.0 measures being proposed to ensure that Ireland’s tax policy can continue to support economic growth and prosperity.
The consultation period will run until 10 September 2021.
The consultation document highlights that the outcome of the two-pillar solution has the potential to significantly impact Ireland, particularly with regard to Ireland’s 12.5% corporation tax rate which has been a key feature of Ireland’s ability to attract real investment and employment. The consultation document reiterates that Ireland remains committed to the OECD process and aims to find an outcome that it can support.
The consultation document concisely summarizes Ireland’s position with regard to Pillar One and Pillar Two. Ireland has indicated that it is fully supportive of the Pillar One proposal to re-allocate a proportion of taxing rights to market countries, recognizing that the international tax framework must evolve to accommodate how businesses operate in today’s digitalized economy. Ireland has been clear in expressing broad support for the agreement on Pillar Two but not with regard to the proposed global minimum effective tax rate of “at least 15%.”
The consultation document sets forth the following questions:
Do you have views on the broad policy objectives of the OECD international tax proposals?
Are there specific implications for Ireland’s corporation tax regime that would arise from adopting and implementing the OECD proposals that require particular consideration? What are the benefits and challenges for Ireland?
Are there specific features in the design of the Pillar One proposals which, in your opinion, may have particular implications for Ireland and our tax policy?
Pillar Two proposals include agreeing to adopt an Income Inclusion Rule, an Under-Taxed Payments Rule and a Subject To Tax Rule. Are there any specific features of introducing these rules that warrant particular attention with regard to their implications for Ireland’s tax code and tax policy?
Are there any specific issues which should be considered in respect to implications for the Irish tax code arising from the GILTI, SHIELD and other US corporate tax reform proposals, with particular reference to the significance of US MNEs in Ireland?
Are there specific considerations of particular significance that should be taken into account in deciding how any final agreement should be implemented?
Are there any further considerations that should be taken into account, including in respect to Ireland’s wider industrial policy arising from the OECD proposals?
EY welcomes the public consultation and will continue our active engagement with the Irish Government and other stakeholders on the global reform process.
We look forward to continued discussion on this critical area with taxpayers and assisting them in formulating their position on the consultation.
For additional information with respect to this Alert, please contact the following:
Ernst & Young (Ireland), Dublin
Ernst & Young (Ireland), Financial Services, Dublin
Ernst & Young (Ireland), Cork
Ernst & Young (Ireland), Limerick
Ernst & Young (Ireland), Waterford
Ernst & Young (Ireland), Galway
Ernst & Young LLP (United States), Irish Tax Desk, New York
Ernst & Young LLP (United States), Irish Tax Desk, San Jose
Ernst & Young LLP (United States), FSO Irish Tax Desk, New York