On 1 July 2021, the Organisation for Economic Co-operation and Development (the “OECD”) Inclusive Framework reached agreement but not unanimous consensus on key aspects of the two-pillar solution to address tax challenges arising from digitalisation and globalisation.  The Irish Department of Finance on 20 July 2021, announced a Public Consultation on these international tax proposals (the “Proposals”) which concluded last week. Arthur Cox made a submission to the Department of Finance which you can access here.

Amongst other things, Pillar One proposes a re-allocation of a proportion of tax to the market jurisdiction, while Pillar Two seeks to apply a global minimum effective tax rate of at least 15%.  In principle, our view is that a co-ordinated OECD approach on these matters is favourable, rather than a unilateral approach by individual nations or groups of nations taking divergent and potentially discriminatory action.  However, there are a number of elements of the Proposals, as currently drafted, which raise concerns.


Key Issues:

  • We are of the view that many of the existing Base Erosion and Profit Shifting (“BEPS”) measures are already having an impact and consider it premature to introduce additional BEPS measures until a thorough assessment is made on the effect of those measures already in existence. Furthermore, taxing market access could be effected in a simpler and more transparent manner than that proposed through increasing the rates of VAT and other consumption taxes.
  • The lack of consideration for climate change in the drafting of the Proposals is a major concern. At variance with its report on Tax Policy and Climate Change, the OECD have ignored the most pressing issue of our time in failing to address the need for a comprehensive package of tax measures to enhance global climate change mitigation strategies.
  • The Proposals suggest a lack of understanding on the part of the OECD of the needs of countries that are small, peripheral or developing. It is legitimate for such countries to utilise their tax policy to compensate for their competitive disadvantages such as location, access to markets, resources and size and one could view the current proposals as a means of undermining fair competition from such small, peripheral nations and tilting the “playground” in favour of large economies with good connectivity to large markets.
  • Implementation of the Proposals will generate large volumes of work for the legal sector as their unwieldy complexity will inevitably lead to disputes. Despite our vested interest, this is not a good economic outcome.
  • How the Proposals will be implemented as a matter of Irish law could give rise to a number of constitutional issues. In particular, an EU Directive may abrogate the fundamental role of Dáil Éireann in initiating money bills and may require a referendum.
  • The Irish tax regime is not in line with that of the primary countries driving these changes. The implementation of BEPS 1.0 and ATAD (EU Council Directive 2016/1164) into our already complex tax regime is not yet complete and the addition of the Proposals as an extra layer of complexity could lead to major issues and administrative burdens for multinational businesses with Irish operations.
  • The impact of the Proposals on Ireland’s funds and securitisation industries also requires careful consideration.
  • Finally, not only do some of the concepts as outlined in the Proposals deviate from what was set out in the Pillar One and Pillar Two Blueprints released by the OECD Inclusive Framework in October 2020, but the Proposals also lack sufficient detail to allow for a thorough review of how these measures may be implemented. Clarification on a number of key points will be important for all multinational businesses.

Arthur Cox LLP has made a submission to the Department of Finance in respect of these and other aspects of Ireland’s implementation of the Proposals which you can access here.


If you would like to discuss this topic please contact a member of the Arthur Cox Tax Team.