After decades of finance ministers saying Ireland would never abandon the 12.5% corporation tax rate, finance minister Paschal Donohoe has announced that he will increase the rate to 15% after Ireland signs up to the new OECD tax framework.

The minister (pictured) stated: “There are two pillars to this agreement. Pillar 1 will see a reallocation of a proportion of profits to the jurisdiction of the consumer. Pillar 2 will see the adoption of a new global minimum effective tax rate applying to multinationals with global revenues in excess of €750m.

“The agreement represents 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.”

The decision came after negotiations led to the words ‘at least’ being deleted so that the proposal is now for a precise rate of 15%, and no more.

Most Irish companies will not be affected by the new framework and the rate increase. The Department of Finance estimates that the new rate will apply to 56 Irish multinationals employing approximately 100,000 people, and 1,500 foreign-owned MNEs employing about 400,000.

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“For more than 160,000 businesses in Ireland with a turnover less than €750m per annum, who employ approximately 1.8 million people, there will be no change to their corporation tax rate of 12.5%,” added the minister.

“I am confident that Ireland will remain competitive into the future, and we will remain an attractive location and ‘best in class’ when multinationals look to investment locations. These multinational enterprises support our economy with high-value jobs, and at the same time Ireland provides a stable platform and a long, proven track record of success for MNEs choosing to invest here.”

A full statement by the minister on the new agreement is available here.