In the world of technology, Ireland is one of the most important countries. Although this nation has had an expansion in the sector, the response to its success as a technology center is related to its policies on taxes. However, this business-friendly tax system could have an end.
In Ireland, the corporate tax rate is 12.5%, the lowest in the European Union, which has represented an attraction for companies and influenced the economic recovery of that nation after the recession that arose between 2007 and 2011. But those factors are not the only ones that motivated technology companies.
Foreign investment by companies such as Facebook, Google, Amazon or Tik Tok, among others, whose European headquarters are in that country, is also due to the policies implemented by the government, which are favorable for conducting business.
In 2017, then-Irish Prime Minister Leo Varadkar pledged to make Dublin “the tech capital of Europe”, and so far, nearly 1,000 tech multinationals have established Ireland as their hub in the UK. European Union.
Likewise, there is a panorama of startups that has prospered in recent years, due to the growing number of incubators and accelerators that exist in the country. Due to this same element, technology companies have realized that Ireland is a country that has the infrastructure and the ideal workforce to develop their businesses.
However, the tax issue is the most attractive for companies, because until now, companies can establish branches in countries with low rates and declare their profits there. This means that they only pay the local tax rate, even if their profits come from sales made in other countries.
An example of this was reported by the Spanish newspaper in 2019, when Google paid eight million euros in Spain for companies, despite having declared just over 130 million, in addition to the fact that most of its services were billed from Ireland.
Another case is that of Microsoft, whose Irish subsidiary declared in 2020 a profit of 260,000 million euros from the collection of licenses for the use of software around the world, but paid zero taxes, according to data from the British newspaper.
Although Ireland is an ideal place for technology companies, an international bloc could put a stop to that success following the agreement reached by the G7 economies (United States, United Kingdom, France, Germany, Canada, Italy and Japan), which establishes a minimum global corporate tax rate of 15%, initially.
Following the agreement, German Finance Minister Olaf Scholz said it was “very good news for tax justice and solidarity (…) Companies will no longer be in a position to evade their tax obligations by reserving their profits in countries with lower taxes ”.
For his part, his British counterpart, Rishi Sunak, celebrated that “after years of discussion, the G7 finance ministers have reached a historic agreement to reform the global tax system and adapt it to the digital age.”
It should be remembered that the second part of this agreement is to get companies to pay taxes in the countries where they sell their products or services, instead of only in the places where they declare their profits.
However, Irish Finance Minister Paschal Donohoe has become a barrier to the international offensive. “I anticipate that the 12.5% rate will remain in effect for the next five or 10 years, as well as other low taxes,” he said in mid-May in anticipation of the G7 proposals.
