Ireland among nine jurisdictions not to back the 130 nation global tax deal

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Ireland among nine jurisdictions not to back the 130 nation global tax deal

The Organisation for Cooperation and Development (OECD) has said that 130 countries and jurisdictions have signed up to a plan that will bring sweeping new reforms to global corporation tax rules.

But nine countries including Ireland, Estonia, Hungary, Barbados and Saint Vincent & the Grenadines, Kenya and Nigeria that had been part of the discussions have not yet signed up to plan, the OECD said in a statement.

However after weeks of difficult negotiations big countries who reportedly had difficulty with aspects of the agreement - including China and India - have signed the deal.

Ireland's Department of Finance said that Ireland "broadly supports" the OECD framework, and "fully supports" the pillar one proposals.

"Overall pillar one will bring stability and certainty to the international tax framework and will help underpin economic growth from which all can benefit," it said.

Although it said that Ireland expressed "broad support" for the agreement on pillar two, it noted reservation about the proposal for a global minimum effective tax rate of at least 15%.

"As a result of this reservation, Ireland is not in a position to join the consensus," the statement read.

Those that have signed the deal represent 90% of global GDP, and include the US, China, the UK, France and Germany.

Under the plan, countries will be able to tax the profits of large companies in markets where they are earned regardless of whether they have a physical presence there, while a global minimum tax rate of at least 15% will be set.

The OECD said the plan will ensure that multinational enterprises pay a fair share of tax wherever they operate.

"The remaining elements of the framework, including the implementation plan, will be finalised in October," the OECD said.

"This package does not eliminate tax competition, as it should not, but it does set multilaterally agreed limitations on it." OECD Secretary-General Mathias Cormann said.

Ireland stands to lose up to €2.4bn in tax revenue over the next four years as a result of the changes.

Under the first pillar, taxing rights on more than $100bn of profit are expected to be reallocated from companies' home markets to other jurisdictions every year.

Companies considered in scope would be multinationals with global turnover above €20bn and a pre-tax profit margin above 10%, with the turnover threshold possibly coming down to €10bn after seven years following a review.

Extractive industries and regulated financial services are to be excluded from the rules on where multinationals are taxed.

While the minimum tax rate of at least 15%, agreed under pillar two, is expected to yield up to $150bn in additional revenue every year, the OECD said.

The Irish Government had been resistant to the setting of a global minimum tax rate above its current 12.5% rate because it could take away its competitive edge for foreign direct investment.