Willie O'Dea (Limerick City, Fianna Fail)
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73. To ask the Minister for Finance if he will report on the implementation of Pillar Two of the OECD Base Erosion and Profit Shifting Project; his assessment of the impact of this on the Irish economy; and if he will make a statement on the matter. [54380/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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On 8 October, Ireland was among 136 jurisdictions who joined a two pillar international agreement in October to reform the international tax rules to address the challenges of digitalisation. Pillar One of the agreement will see a reallocation of a proportion of profits to the jurisdiction of the consumer, while Pillar Two will see the adoption of a new global minimum effective tax rate of 15% applying to multinationals with global revenues in excess of €750m. The agreement on Pillar Two allows for the retention of our domestic 12.5% corporation tax rate for the 95% of the companies in Ireland that are out of scope of the agreement.

I have long signalled that there will be a cost to Ireland signing up to this agreement. My Department and Revenue have estimated that the cost to the Exchequer in terms of tax receipts foregone could be up to €2 billion in the medium term. This costing will be kept under review as the critical technical discussions proceed.

However, it is also important to consider the very real risks associated with staying outside the Agreement. As a small open economy, we have strong ties with EU member States, with the US, and other G20 countries. I believe it is essential for our long term competitiveness that we are in line with key international accords such as this agreement.

This has been a difficult and complex decision but I believe it is the right one, and I am confident that Ireland will remain competitive into the future, and we will continue to be an attractive location and ‘best in class’ when multi-nationals look to investment locations.

In respect to implementation, the detailed technical work is continuing at the OECD through the preparation of Model Rules which are due to be finalised by the end of this month. The intention is that the Commission will bring forward a Directive to transpose these Model Rules on 22 December which will then be discussed in the Council Working party early next year. The expected implementation date in the OECD agreement for both pillars is 2023.