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Ireland expects international business tax reforms will cost it EUR2 billion a year

Monday, 24 February, 2020

Ireland's Minister for Finance and Public Expenditure and Reform Paschal Donohoe expects the OECD's base erosion and profit shifting (BEPS) initiative to reduce the country's annual corporation tax receipts by EUR2 billion a year by 2025, equivalent to 2.6 per cent of Ireland's total annual tax revenues.

The BEPS project, which has been in development since 2013, envisages changes to the international rules on nexus, permanent establishment, cross-border taxation, transfer pricing, anti-avoidance and minimum tax rates, to prevent multinational enterprises shifting profits earned from customers in developed countries into low-tax or no-tax jurisdictions. It is now in the final negotiation stages, with agreement expected at G20 level by the end of this year, and implementation of BEPS measures to be phased in from 2021 onwards.

Donohoe's updated Budget 2020 forecast makes explicit numerical provision for the coming changes in Ireland’s corporation tax receipts.

The first post-BEPS year, 2022, will see Ireland's corporation tax receipts fall by EUR500 million a year, it says. There will be a EUR1-billion drop in 2023, followed by a further fall of EUR1.5 billion in 2024, and EUR2 billion in 2025, according to Irish Finance Department's latest budget forecasts.

'The implementation of BEPS will likely result in a decline in corporation taxation receipts, making the need to account for reduced revenue essential', says the forecast. 'While there is some uncertainty surrounding this figure, it is the Department's best assessment, based on ongoing work being carried out by the Revenue Commissioners, that the overall risk from BEPS-related changes could be in the range of EUR800 million to EUR2 billion.'

Donohoe plans to run a budget surplus, as 'the best way of de-risking our economy and our public finances from the shocks that, as a small open economy, are likely'.

'Changes to international taxation are on the way', he said. 'We have no control over this and we must prepare for this. This is why we need surpluses.'