The Republic of Ireland has signed on to the Organisation for Economic Co-operation and Development's plans to create harmonised tax laws that stop Big Tech companies reducing their bills by officially conducting their business in low-tax jurisdictions.
Irish law has allowed the likes of Apple, Google, Amazon, Microsoft, and others to use legal-but cynical arrangements – some known as the "Double Irish Dutch Sandwich" – to considerably reduce their tax bills. The country did so as part of an investment attraction strategy, and it worked – Ireland ended up with big offices and lots of jobs.
Other nations around the world did not like this one bit, as the gourmet accounting practices required to assemble the sandwich saw what little tax was paid end up in jurisdictions other than where consumers actually consume Big Tech's products. Governments therefore felt they were missing out on money.
A multi-year effort by the OECD sought to stop such practices, through the Base Erosion and Profit Shifting Project [PDF]. The core goal of that Project is to create a global minimum effective corporation tax rate of 15 per cent for multinationals with revenues in excess of €750 million.
As of August 2021, 140 nations had signed up to that plan. Yesterday, Ireland did too.
- G20 finance ministers agree plan to make multinationals pay their 'fair share' of tax
- €13bn wings its way back to Apple after Euro court rules Irish tax deal wasn't 'state aid'
- Amazon UK business swelled by 50%+ in 2020, and taxes soared. Lol, no, it means those paid by its staff
Ireland's Minister for Finance Paschal Donohoe yesterday hailed the change as "an important step towards resolving the issues brought about by the digitalisation of the economy which resulted in the international tax framework struggling to accommodate the evolving business models of large multinational enterprises".
He added that "56 Irish multinationals employing approximately 100,000 people, and 1500 foreign-owned MNEs based in Ireland employing approximately 400,000 people" will be required to cough up at least 15 per cent as a result of Ireland agreeing to the OECD plan.
And that plan will advance today, at a meeting to address remaining issues and offer a detailed implementation plan.
The plan is scheduled for completion in October and it's hoped nations can go after their 15 per cent tax from 2023.
In theory that should mean governments have more cash to serve us all – or at least pay off the colossal debts incurred keeping economies afloat during COVID while Big Tech’s profits soared. ®