Goodbye to the Irish tech hub? The rise in corporate tax in Ireland sows doubts about its future

A few weeks ago, Ireland made a historic decision that may determine its future. By accepting the OECD agreement to raise corporate tax to 15%, you end the low tax policy with which it managed to become one of the main technology centers in Europe. Now, the ball is in the court of companies, which can decide to stay in the country or go in search of pasture with lower taxes.

This is one of the biggest changes to Ireland’s tax system in decades and its effect could be devastating to the country’s economic model, some experts argue. The country’s own Minister of Economy, Paschal Donohoe, said earlier this year that this agreement could involve the loss of around € 2 billion a year in tax revenue by 2025.

In contrast, the former chairman of the Irish Tax Advisory Council and an economist at University College Cork, Seamus Coffey, believes that moving from a tax rate of 12.5% ​​to 15% will not have such a significant impact in the short and medium term. Above all, because, until its ban in 2015, technology companies they resorted to aggressive evasion schemes to avoid paying said tax, such as the so-called “double Irish sandwich, Dutch sandwich”, by means of which they transferred to foreigners the income generated in Europe. He also points out that “if taxes can rise as inexplicably as in the last 7 years, there is also the possibility that they will go down in the same way.”

A reputation that does not match the tax figures collected by the Irish government. The Irish Tax Advisory Council estimates that 56% of net income from corporate tax in 2019 came from just 10 companies. Meanwhile, a former senior Irish prosecutor estimates that Microsoft, Apple and Pfizer account for around 30% of the levy’s collection.

According to the experts consulted by The Guardian, the tax system has never been the main reason why more than 1,500 foreign companies – including Google, Facebook, Yahoo, Apple, LinkedIn, eBay, Amazon and TikTok – have chosen to locate their headquarters in the Irish capital. In many cases, cultural ties with the United States have prevailed, the fact of sharing a common language and have labor legislation designed to promote talent hiring and firing.

Finally, the G20 has approved the global minimum tax of 15% for large companies, thus dispelling Ireland’s fear that it would give in to pressure from France and Germany to increase it. The average corporate tax rate for the 37 members of the OECD as a whole is approximately 23%.