Ireland has finally agreed to join a global deal that will raise its corporate tax rate to 15%, which is a major shift in its policy towards corporate taxation.
The G-20 nations agreed earlier this summer to work together to crack down on tax evasion by standardizing global tax rules. The plan is to introduce a minimum corporate rate of 15% for multinational companies, not just in countries where they are headquartered but also in countries where they operate.
The Republic of Ireland has become the latest country to join the global tax system. The country has been one of the world's most attractive places for corporations with low corporate tax rate. Until now, the country has refused to join the global initiative.
On Thursday, the Irish Cabinet approved an increase from 12.5% to 15% in corporation tax for companies with annual turnovers of over 750 million euros ($867 million). The country's finance minister, Paschal Donohoe, confirmed the decision to reporters later in the day.
Donohoe said during the course of negotiations, various countries have had to make compromises and now Ireland is joining those 140 countries involved in the initiative.
"I believe that the agreement achieves a balanced and fair compromise that recognizes the interests of all the parties involved," he said.
Joining the deal would lower Ireland's tax take by an estimated 2 billion euros ($2.3 billion) a year, according to the country's Department of Finance. A poll conducted by The Irish Times showed that decision was opposed by majority of the public.
Hungary, another country that has held off in joining the global tax deal, is reportedly now reconsidering its decision. The country's finance minister, Viktor Orban, said on Thursday that his country would be interested in participating in the global tax deal if a 10-year implementation period was agreed.
Luxembourg's finance minister, Pierre Gramegna, said Wednesday that he was confident that a corporate tax agreement would be reached within days. French Finance Minister, Bruno Le Maire, also expressed his confidence in ironing out the tax deal, stating that it was "one millimeter away" from being reached. He said that an agreement on implementing the international taxation system could be reached by the end of the month.