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New G7 tax regime is worrying news for Ireland

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Last weekend’s news that the G7 group of wealthy nations plan to extract more tax from high-profile tech corporations may be good news for those who feel these super rich companies are not paying their fair share. However, this new plan may be bad news for Ireland, the most successful country in Europe when it comes to attracting Foreign Direct Investment as Ken Murray reports from Dublin.

When finance ministers from the seven richest nations on earth gathered at Lancaster House in London last weekend to discuss their respective and global fiscal issues following on from the COVID-19 pandemic, one particular person from Ireland sat in the room as an apprehensive observer.

Irish Finance Minister Pascal Donohoe (pictured) was there in his role as chairman of the European Commission euro group. It’s the all-important Committee that represents the 19 EU states that use the euro currency on a daily basis.

After much too-ing and fro-ing, the G7 and EU concluded their meeting with a communiqué stating that corporate or business tax will be raised to a minimum rate of 15% with an emphasis that the money will be paid in the country where the production operation is based rather than the location of the corporation HQ.

To the average Joe and Mary Bloggs living in downtown Berlin, Rome, London or Paris, 15% is no big deal but in Ireland where the corporate tax rate is 12.5%, the 2.5% gap could be the difference in attracting or losing jobs as foreign corporations look for the cheapest and most attractive options to set up European hubs to maximize their respective profits and increase their stock market value.

At a time when Ireland’s competitiveness is suffering the most over Brexit as it now costs more to move product through the UK to get to mainland Europe and vice-versa, the last thing the Irish government needs is would-be US investors by-passing the country because it has lost its hitherto attractive incentive.

“I am very confident that while there is change coming...this is change we can respond to,” said Minister Donoghue afterwards with his Irish Finance ‘hat’ on, suggesting that the Dublin Government will do all in its power to hold on to the foreign corporations in Ireland who play a huge part in propping up the Country’s GDP figures.

According to the Irish Fiscal Advisory Council, the increase in corporation tax for foreign investors could cost the exchequer in Ireland a hefty €3.5 billion per year, an unwelcome prediction at a time when the Country has just added €50 billion to its national debt due to Covid.

This is a not a lot of money in each of the G7 nations but in the Republic of Ireland where the population is just under five million, €3.5 billion pays a lot of bills!

As it is, attracting FDI or foreign direct investors in to Ireland has been a hugely successful policy by the Irish Industrial Development Authority since the 1980s.

When the Irish economy was stagnant then, FDI was difficult due to the ongoing war in Northern Ireland while the mass emigration of highly skilled college graduates to foreign states proved to be politically unpopular.

As a result, a major plan to attract leading US corporations in to Ireland became a number one priority with the Irish state, metaphorically speaking, ‘bending over backwards’ to lure these companies in with a wide array of incentives and supports.

The introduction of a corporate tax rate of 12.5%, the evolving fact that Ireland is now the largest English-speaking country in the EU and with a steady supply of highly skilled tech graduates from its growing number of industry-driven colleges, the Country has become something of a magnet for major US tech giants.

With a special income tax rate in place for CEOs as the ultimate sweetener, ten of the major tech companies in the World have now chosen Ireland as their European base.

These include Apple, Microsoft, Facebook, Google, Twitter, Pay Pal, Linkedin, Intel, eBay and Tik Tok. Add on Pfizer, Wyeth and Eli Lilly pharmaceuticals to name some of many, the 1600 or so foreign companies operating in Ireland who employ a minimum of 250,000 people, have contributed enormously to the Irish exchequer and not surprisingly, the Government in Dublin is keen to retain them and continue the determined push to attract more.

Despite the fear that the expected ‘level playing pitch’ could see Ireland less attractive than other EU states for attracting new business, Pascal Donoghue indicated at the weekend that the G7 statement is not the end of the matter.

Speaking to reporters, he emphasised than an OECD meeting later this year is likely to determine where non-G7 countries stand in relation to corporation tax on foreign investors.

“Today is a very clear signal regarding the larger economies’ view of that process but we have some time to go on the OECD process and even when that concludes, the actual agreement has to be implemented.

“The implementation of the last agreement on corporate tax took many years. [That] will be the case with this again both from a legislation and implementation point of view.”

In the meantime, as the Irish Government worries that Ireland may not be as financially attractive for FDI investors in the future if these revised tax rates take hold, Minister Donoghue indicated that he will present his case to US Treasury Secretary Janet Yellen and the OECD Secretariat to make the point that small countries need to be allowed to remain competitive otherwise their respective economies will struggle.

“[I have] continued to make the case for legitimate tax competition inside certain boundaries,” he said, suggesting that the Irish Government will continue to fight a determined rear guard action to retain its attractive 12.5% tax rate.

The matter is likely to dominate the next meeting of G20 countries when they meet in Rome next October.

Belgium

Iranian Opposition rally in front of US embassy in Brussels to ask US and EU for a firm policy towards Iranian regime

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Following the G7 summit in London, Brussels hosts the NATO summit with US and EU leaders. It is the first trip of President Joe Biden outside the US. Meanwhile, the Iran deal negotiations have started in Vienna and despite the international efforts to return Iran and the US to compliance with the JCPOA, Iranians regime showed no interest to return to its commitments under JCPOA context. In the recent IAEA report, important concerns have been raised that the Iranian regime failed to address.

The Iranian diaspora, supporters of the National Council of Resistance of Iran in Belgium, held a rally today (14 June) in front of the US embassy in Belgium. They held posters and banners with the picture of Maryam Rajavi, the leader of the Iranian opposition movement who has declared a non-nuclear Iran in her 10-point plan for the free and democratic Iran.

In their posters and slogans, Iranians asked the US and the EU to work harder to hold the mullahs’ regime accountable for its human rights violations too. The protesters emphasized the need for a decisive policy by the US and the European countries to harness the mullahs’ quest for a nuclear bomb, stepped up repression at home, and terrorist activities abroad.

According to the new IAEA report, despite the previous agreement, the clerical regime refuses to answer IAEA questions on four disputed sites and (to kill time) has postponed further talks until after its presidential election. According to the report, the regime's enriched uranium reserves have reached 16 times the limit allowed in the nuclear deal. The production of 2.4 kg of 60% enriched uranium and about 62.8kg of 20% enriched uranium are of grave concern.

IAEA Director-General Rafael Grossi said: Despite agreed terms, “After many months, Iran has not provided the necessary explanation for the presence of the nuclear material particles…We are facing a country that has an advanced and ambitious nuclear program and is enriching Uranium very close to weapons-grade level.”

Grossi’s remarks, also reported by Reuters today, reiterated: “The lack of clarification of the agency’s questions regarding the accuracy and integrity of Iran’s Safeguard Declaration will seriously affect the agency’s ability to ensure the peaceful nature of Iran’s nuclear program.”

Maryam Rajavi (pictured), the President-elect of the National Council of Resistance of Iran (NCRI), said that the recent report of the International Atomic Energy Agency (IAEA) and the remarks by its Director-General once again show that to guarantee its survival, the clerical regime has not abandoned its atomic bomb project. It also shows that to buy time, the regime has continued its policy of secrecy to mislead the international community. At the same time, the regime is blackmailing its foreign interlocutors into lifting sanctions and ignoring its missile programs, export of terrorism, and criminal meddling in the region.

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Brexit

Ex-EU Brexit negotiator Barnier: UK reputation at stake in Brexit row

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Head of the Task Force for Relations with the UK, Michel Barnier attendsthe debate on EU-UK trade and cooperation agreement during the second day of a plenary session at the European Parliament in Brussels, Belgium April 27, 2021. Olivier Hoslet/Pool via REUTERS

Michel Barnier, the European Union's former Brexit negotiator, said on Monday (14 June) that the reputation of the United Kingdom was at stake regarding tensions over Brexit.

EU politicians have accused British Prime Minister Boris Johnson of not respecting engagements made regarding Brexit. Growing tensions between Britain and the EU threatened to overshadow the Group of Seven summit on Sunday, with London accusing France of "offensive" remarks that Northern Ireland was not part of the UK. Read more

"The United Kingdom needs to pay attention to its reputation," Barnier told France Info radio. "I want Mr Johnson to respect his signature," he added.

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coronavirus

Parliament president calls for a European Search and Rescue Mission

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European Parliament President David Sassoli (pictured) has opened a high-level interparliamentary conference on managing migration and asylum in Europe. The conference focused particularly on the external aspects of migration. The president said: “We have chosen to discuss today the external dimension of migration and asylum policies because we know that only by tackling the instability, crises, poverty, human rights violations that occur beyond our borders, will we be able to address the root causes that push millions of people to leave. We need to manage this global phenomenon in a human way, to welcome the people that knock on our doors every day with dignity and respect.
 
“The COVID-19 pandemic is having a profound impact on migration patterns locally and worldwide and has had a multiplier effect on the forced movement of people around the world, especially where access to treatment and healthcare is not guaranteed. The pandemic has disrupted migration pathways, blocked immigration, destroyed jobs and income, reduced remittances, and pushed millions of migrants and vulnerable populations into poverty.
 
“Migration and asylum are already an integral part of the external action of the European Union. But they must become part of a stronger and more cohesive foreign policy  in the future.
 
“I believe it is our duty first of all to save lives. It is no longer acceptable to leave this responsibility only to NGOs, which perform a substitute function in the Mediterranean. We must go back to thinking about joint action by the European Union in the Mediterranean that saves lives and tackles traffickers. We need a European search and rescue mechanism at sea, which uses the expertise of all actors involved, from Member States to civil society to European agencies.
 
“Second, we must ensure that people in need of protection can arrive in the European Union safely and without risking their lives. We need humanitarian channels to be defined together with the United Nations High Commissioner for Refugees. We must work together on a European resettlement system based on common responsibility. We are talking about people who can also make an important contribution to the recovery of our societies affected by the pandemic and demographic decline, thanks to their work and their skills.
 
“We also need to put in place a European migration reception policy. Together we shoulddefine the criteria for a single entry and residence permit, assessing the needs of our labor markets at a national level. During the pandemic, entire economic sectors came to a halt due to the absence of immigrant workers. We need regulated immigration for the recovery of our societies and for the maintenance of our social protection systems.”

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