Republic of Ireland to increase corporation tax rate to 15%

The Irish government will support a deal to set a global minimum corporation tax rate for large firms.

It means the country increasing its 12.5% rate to 15% for firms with a turnover of more than €750m (£636m).

Smaller businesses will still be taxed at the 12.5% rate.

The Organisation for Economic Cooperation and Development (OECD), an intergovernmental economic organisation, has led work to agree a global minimum rate.

Ireland's Finance Minister Pascal Donohoe said that backing the deal was "a serious and complex decision."

He added that he was "absolutely certain" that Ireland's interests were served by being part of the deal.

The 15% rate will apply to 56 Irish multinationals employing approximately 100,000 people, and 1,500 foreign-owned firms based in Ireland employing approximately 400,000 people.

More than 100 countries supported the initial OECD proposals when they were announced in July.

However, Ireland did not sign up at that time, objecting to a proposal to set a rate of "at least 15%".

It argued that would cause uncertainty as it could mean the rate rising further in the future.

Mr Donohoe said the OECD text now refers simply to a rate of 15%.

For the past 20 years Ireland has used its low tax rate as a central part of efforts to attract foreign investment, particularly from the United States.

A global minimum rate would weaken the incentives for multinational companies to shift their profits to places where the tax rate is lower.

Mr Donohoe said he was confident that Ireland would remain competitive into the future.

"We will remain an attractive location and 'best in class' when multi-nationals look to investment locations," he said.

"These multinational enterprises support our economy with high value jobs and at the same time, Ireland provides a stable platform and a long proven track record of success for MNEs choosing to invest here."

The OECD proposals would also change where taxes are collected, with a greater focus on taxing profits where sales are made.

That would mean more tax being collected in large consumer markets such as France and Germany and less in smaller markets such as Ireland.

Ireland's Department of Finance has estimated that change could reduce its corporation tax take by about €2bn (£1.7bn) a year.

The OECD is holding talks on Friday that could lead to agreements on the finer details of the reforms.

G20 leaders are then expected to sign off on the deal when they meet in Rome in late October.

However, all the signatories will then have to put the reforms into domestic legislation, meaning it will be 2023 at the earliest before the new regime could be in place.