By Padraic Halpin

DUBLIN (Reuters) – A global deal overhauling how multinational companies are taxed is likely this year, an official overseeing the talks said on Wednesday, as low-tax Ireland called for any agreement to work for small countries and allow for tax competition.

The Organisation for Economic Cooperation and Development (OECD) has been coordinating talks among 140 countries for years and aims to reach a consensus by mid-2021, bolstered by the new U.S. administration’s support for a global corporate minimum tax rate.

“There is momentum, there is a new dynamic that is likely to bring us to a resolution,” OECD head of tax Pascal Saint-Amans told an online conference organised by the Irish government.

Saint-Amans said a July meeting of G20 finance ministers would be a very important milestone and that if some matters remained outstanding, there will certainly be a deal before G20 leaders meet in October.

Ireland is one of the countries with most to lose from the process with big multinationals such as Facebook, Google and Apple – attracted by the country’s 12.5% corporate tax rate – directly accounting for around one in eight jobs in the economy.

Finance Minister Paschal Donohoe said Ireland is committed to reaching an agreement but that the narrative in recent weeks has confirmed his reservations about a global minimum corporate tax rate.

He said countries must agree on the political principles underlying this concept and must have regard for countries like Ireland that use tax to attract jobs and large investments, adding that such discussions have yet to take place.

The system must also facilitate innovation and investment, he said, a nod to how Ireland and others allow companies to cut their tax bills through research and development and the location of intellectual property.

It must also “accommodate Ireland’s 12.5% rate,” he added, making the case that if there is to be a global minimum rate, it should be well below the 21% proposed by the Biden administration.

“I believe that small countries, and Ireland is one of them, need to be able to use tax policy as a legitimate lever to compensate for the real, material and persistent advantage enjoyed by larger countries,” Donohoe said.

DEAL ‘WITHIN REACH’

As well the United States throwing its weight behind a global minimum tax, the OECD’s Saint-Amans said Washington had also added new impetus to the other pillar of the OECD talks, the shifting of more taxing rights to governments where the end customer is.

The U.S. proposal to target “the winners of globalisation” with this move addresses most of the concerns expressed during a recent public consultation, Saint-Amans said, and simplifies an initial OECD blueprint he acknowledged was far too complex.

There is not yet consensus of how and what share of a company’s profit should be taxed in this way, he added.

Speaking at the same conference, the director general of finance at the Italian finance ministry, Fabrizia Lapecorella, said agreement by July was within reach. Italy is this year’s president of the Group of 20 rich and emerging nations.

 

(Reporting by Padraic Halpin; Editing by Hugh Lawson and Jane Merriman)