Economic and Investment Outlook

OECD's BEPS process may impact FDI offering Pillar Two due for EU implementation in 2024, Pillar One still to be ironed out Pillar One: proposal to re-allocate taxing rights on non- routine profits ▸ Over 130 countries have signed on for the BEPS 2.0 two- pillar set of reforms. The first pillar focuses on proposals that would re-allocate some taxing rights between jurisdictions where companies reside and the markets where user/consumers are based. ▸ Under such a proposal, a proportion of profits would be re- allocated from small countries to large countries. Pillar 1 will reduce Ireland's corporation tax base. Some estimates place the hit at c. €2bn per annum by the middle of the decade. Ireland has always been fully supportive of Pillar One despite the implied cost to the Exchequer. Pillar Two: 15% minimum effective global tax rate ▸ Countries will introduce a minimum effective tax rate with the aim of reducing incentives to shift profits. ▸ Where income is not taxed to the minimum level, there will be a 'top-up' to achieve the minimum rate of tax. ▸ The EU have agreed a directive to implement the 15% rate in 2024. ▸ The minimum rate is greater than the 12.5% rate that Ireland levies and thus some of Ireland's comparative advantage in attracting FDI will be lost. However Ireland's rate will remain one of the lowest in EU. ▸ Ireland can lean on other positives; educated and young workforce, English speaking, EU access, and ease of doing business. Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta National Treasury Management Agency 24 24

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