New global tax rules will not hinder foreign investment in Ireland

The President of the Irish Tax Institute will today predict that foreign investment in Ireland will not dry up as a result of the new Pillar Two global minimum tax rules for large multinational businesses.

Speaking at the Institute’s Annual Dinner this evening (Friday), Tom Reynolds will also warn that this optimism is dependent on the Government making Ireland more competitive as a location for investment by delivering on reforms that would simplify the business tax code.

The cost and ease of doing business were as important as our 12.5% rate in the investment decisions of the companies I have worked in.” Mr Reynolds has worked in senior global tax roles in multinational entities for almost 30 years and has recently taken up the role of Global Head of Tax for the Schneider Electric owned software company, Aveva.

He says implementing Pillar Two will be complex and expensive. And he calls for a properly resourced simplification project with a clear timetable for the delivery of reforms that would ease compliance and give certainty to domestic and multinational businesses alike. “The competition for foreign investment is intensifying and big countries like France and Germany are joining the fray. We cannot afford to lose ground.”

In his speech this evening, Mr Reynolds will also call on Revenue to be pragmatic in its approach to compliance with the new Pillar Two rules for large multinational businesses.

Those of us who work in the tax functions of large multinationals are now getting our heads around how we comply with what is in effect a new and untested taxing system that sits alongside our domestic corporation tax code. Suffice it to say that we need Revenue to be supportive and pragmatic in the bedding in period ahead.

The President also warns of the inevitability of tax disputes and Revenue audits because of divergences in the interpretation and implementation of the rules internationally. “We need workable resolution mechanisms to deal with these disputes. Otherwise, businesses could end up in lengthy tax legal processes, potentially with multiple tax authorities. That would add cost and uncertainty to an already difficult global trading environment.”

He says large multinational businesses will need to beef up resources and build new systems to collect the large amount of data demanded by the new reporting requirements. “Companies are realistic, and they will get on with it. But after a decade of upheaval in international tax, they need certainty and space to get on with growing their businesses.”

Mr Reynolds says our booming corporation tax receipts should be used wisely and efficiently to make Ireland a great place to live for our citizens and for those who come here to work.

He says that Ireland’s reputation as a stable, open, and tolerant democracy has been a huge asset in attracting foreign investment to Ireland. “But that reputation could easily be undone. In the current testing times, we must all play our part in protecting it. We all have a role.”