Ireland said it is joining the agreement International taxes the profits of multinational corporations at a rate of at least 15 percent.
This is a major shift for the country that is the European headquarters of many large US pharmaceutical companies, as well as technology companies, including Google, Apple and Facebook.
The increase from the current 12.5 percent in Ireland to 15 percent may not seem so huge on its own. But the so-called Comprehensive Framework Agreement of the Organization for Economic Cooperation and Development, set out in July, is a two-pillar plan designed to help end tax evasion and make international tax rules more fair and transparent.
The Organization for Economic Co-operation and Development has estimated that a 15 percent tax rate generates about $150 billion in global tax revenue annually and helps stabilize the international tax system.
Ireland signed the agreement in the Organization for Economic Cooperation and Development among 140 countries that have been negotiating its terms for several years. The plan calls for global companies to pay taxes in the countries where their products or services are sold, even if they do not have a physical presence there.
This requirement applies to multinational companies with revenues of more than 750 million euros (about 867 million dollars). For companies with revenues of less than 750 million euros, the 12.5 percent rate remains in effect in Ireland.
Over the past several decades, Ireland has served as a tax haven for many large technology companies. This is thanks to the low corporate tax rate.
The companies usually set up Irish subsidiaries of their companies that licenses their intellectual property, for which the subsidiary pays commissions.
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Ireland has signed an agreement aimed at reducing tax evasion
There are about 800 US companies with operations in Ireland, according to the American Chamber of Commerce in Ireland. These companies employ about 180,000 people.
Apple opened its first manufacturing facility in Ireland at its headquarters in Cork in 1980, with 60 employees. While it now employs about 6000 people.
And Facebook established its international headquarters in Dublin in 2008. Google announced that its European headquarters is located in Ireland in 2003.
Irish Finance Minister Pascal Donohoe said in a statement that the agreement addresses the tax challenges of digitization. Donohue added that he believes companies are still choosing to locate their headquarters in the country.
“I am confident that our country will remain competitive in the future,” Donohue said. We remain an attractive and best-in-class site when multinationals look to investment sites. These multinational corporations support our economy with high-value jobs. At the same time, we provide it with a stable platform and a proven track record of success for multinational companies that choose to invest here.
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