Speech to Irish Times/PwC Tax Summit

17th September, 2019

Speech by Minister Paschal Donohoe, TD

PWC/Irish Times Event

17th September 2019


Good morning everybody.

It is my great pleasure to be able join you today at this year’s PWC/ Irish Times Tax Summit.

I would like to thank you for inviting me to open this important conference. It is a useful opportunity to take stock of where we are and where we are going. 

I would also like to take this opportunity to extend a warm welcome and say cead mile failte to Pascal Saint-Amans who has travelled from the OECD in Paris to join us here today.

Before moving to the main issue of international corporate tax reform it is timely to briefly mention Brexit and the upcoming Budget.


It is clear that the UK’s departure from the EU poses an unprecedented challenge for the island of Ireland. It is a permanent change in the political and economic environment in which the EU and the UK will exist.

Given the depth and breadth of our connection with the UK, Brexit represents a unique challenge for Ireland, North and south.

It is the Government’s assessment that there is a significant risk of a no deal Brexit on 31 October and work on no deal Brexit preparations has the highest priority across Government.

It sets out the next steps to be taken between now and 31 October.

Key areas for continued work at Government level will include additional infrastructure for ports and airports, a new phase of the Government’s Brexit communications, including an intensified engagement programme by Revenue, focussed on individual businesses and including targeted letters and follow-up phone calls.

It is only by Government, business and citizens working together nationally and with our EU partners that we can aim to mitigate, as far as possible, the impacts of a no deal Brexit, and ensure that we are as prepared as we can be for the changes it will bring.

Budget 2020

Given the lack of clarity regarding the timing and format that the UK’s exit will take, I announced last week that Budget 2020 will be framed on the assumption of a ‘no deal’ Brexit.

Three main factors influenced the Government’s approach:

  • Firstly, to give certainty to businesses and citizens that the Government is prepared for a no-deal Brexit and stands ready to support the economy in such a scenario;
  • Second, to safeguard the hard won progress of recent years in stabilising the public finances;
  • Finally, to avoid a situation in which decisions made in the Budget might need to be reversed in future.

Assuming a no-deal Brexit ensures the Government has the necessary resources at its disposal to meet the impact of this exceptional challenge, whilst preserving the longer-term sustainability of the public finances.

So the approach I am adopting for Budget 2020 involves a twin track approach, namely:

  • Funding services and making progress on particular policy areas; and
  • Supporting sectors and regions most exposed to Brexit related disruption.

In a ‘no deal’ scenario, the Government will make the resources available to support those in need and introduce timely, targeted and temporary supports to the sectors of the economy most exposed to the impact of a no-deal Brexit.

Because of the assumption we have made about the nature of Brexit, the decisions on tax measures that I will introduce on Budget Day will be made in a unique context.

In a no-deal scenario it is likely that, while tax revenues will continue to grow, the rate of that growth will be lower than initially forecast.

In addition to this, a possible increase in social welfare expenditure will have a significant impact on the public finances regardless of any specific tax changes announced next month.

This will be a safe Budget that protects the progress we have made and prepares us for the future.

As we enter a turbulent time, it is essential that the Government invests in building up our capacity to respond to external risks.

Because of the consistent polices we have pursued since 2011, the economy is in a much stronger position to respond to a no deal Brexit than it was on the eve of the 2008 financial crisis.

Since 2011 we have diversified our economy and economic activity is more balanced.

For example in the bubble years, nearly 10% of the labour force was employed in construction; the figure is now around 6%. 

Credit growth over 2005-2009 averaged over 20% per annum: over 2015-2019 it is broadly level.

When it comes to the public finances, the contrast is even starker.

At the peak of the last economic boom, day to day spending grew by 57%, between 2005 and 2009 – an average increase of 11% each year.

By contrast, between 2015 and 2019 as we emerged from the bailout period and with significant pent-up demands and pressures in our economy and society, day to day spending has grown by a much more modest 19% – an average annual growth rate of about 4%.

So while Budget 2020 may be delivered in ‘interesting times’, it will be delivered from a position of strength.

Global Context

In a wider context, the proposals before the OECD to reform the international corporation tax system have the potential to have far reaching consequences for all countries.

Therefore this seminar is both timely and appropriate in order to share different perspectives on the challenges and opportunities ahead as the debate at the OECD develops.


There remains a great deal of work to be done before we will have a workable agreement at the OECD.

I am heartened to see that there appears to be a strong international consensus that the challenges we are facing are global and as such they are best addressed by finding a sustainable globally agreed solution.

For my part, I have sought to ensure that there is a single global solution. 

During the discussions at EU level, I consistently voiced my opinion that the proper forum to deliver a lasting global solution is the OECD BEPS Inclusive Framework.

This group, whose membership now tops 130 countries and jurisdictions, is the right forum for these discussions. 

Agreements must be global in nature, not just decided among the largest countries.

Challenge ahead

The challenge before us is to build a global and robust tax architecture that works for all into the future.

Make no mistake, whatever emerges from the discussions at OECD will be disruptive. 

These discussions are particularly difficult for small open, export orientated countries such as ours but we must engage and make our voice heard.

I believe that it is in Ireland’s interest that this work is successful at ensuring the continuation of a stable and consensus-based international tax framework into the future.

The certainty and stability that such agreement would bring to the international tax landscape would allow companies to make investment decisions with greater confidence and would facilitate countries’ fiscal planning supporting economic growth and job creation.

Change is coming

The BEPS project has already yielded very significant results, but while it has addressed many of the issues with the international taxation framework it is clear that further work is needed to modernise and futureproof tax rules especially in the context of the digitalised economy. 

As I have said previously, change is coming.  The ongoing work at the OECD will result in further substantial alterations to the international tax architecture.

As you will be aware, an ambitious work plan was approved by the BEPS Inclusive Framework in May.  The work plan emphasises the challenge ahead and the level of commitment needed to work together and find a long-term solution.

When I consider the proposals currently on the table, I see the potential to find a globally acceptable consensus solution within the broad framework of pillar 1.  

An acknowledgement of the changing nature of where profits are generated in the modern economy could produce amendments to current international tax rules which satisfies those countries who are calling for change.   

This is a logical development to account for the advent and adoption of digital technologies which are rendering traditional value chains and business models outdated.

However, it is important that any move in this direction recognises a number of well-established principles.  In particular, the existing transfer pricing rules must remain at the heart of the global tax framework. 

The significant value creating activity that happens in exporting countries, like Ireland, must continue to be recognised and rewarded. 

And further to these principles, the final outcome must not unfairly benefit larger countries at the expense of smaller ones.

Within these parameters I believe we can achieve a consensus on a long term solution.

On the Pillar 2 proposals, however, I remain to be convinced that the issue of addressing the tax challenges of digitalisation requires action in this area.

I am a firm believer that all companies must pay their fair share of tax but any lasting solution to the digitalisation of the economy must not come at the expense of fair and legitimate tax competition.

Competition is a driver of efficiency, and tax competition is particularly important for smaller economies.   

Competitiveness is not just a prerogative of large countries. 

Fair tax competition is a vital tool to ensure that smaller countries can compete against the size, geographical location or resource advantages other countries may enjoy. 

Ireland was ahead of the curve with our focus on having a low but substantial corporation tax rate which is applied to a broad tax base. 

The OECD has long endorsed this as sound economic policy. 

Ireland’s 12.5% corporate tax rate together with targeted measures, such as our R&D tax credit, created a platform for inward investment and an environment to foster robust sustainable economic growth in Ireland. 

As has been witnessed over recent years, many other countries have followed our lead and chosen to reduce their headline corporate tax rates. 

This has not resulted in a reduction in tax receipts but has paved the way for increased investment providing more jobs and more profit which ultimately feeds into economic prosperity increasing the quantum of tax paid.  

A recent OECD analysis has shown that since 2000 the average corporation tax rate globally has fallen by over 7% with more than three quarters of jurisdictions choosing to reduce their rates. 

And as these rates have fallen however, corporate tax receipts have generally increased. 

This is the economic benefit of tax competition and for continued global economic prosperity, for all countries both big and small, it is important that this continues. 

Nevertheless, Ireland is positively engaged in the discussions at OECD and remains open to solutions that respect our right to compete fairly and that respect the legitimacy of Ireland’s longstanding 12.5% corporate tax rate.

In all of these discussions my key priority will be to ensure that as this important work advances, Ireland’s interests are central to the process of forming that globally agreed consensus.


In conclusion, I reiterate my belief that change is coming. This change is both necessary and within our grasp. 

I am in no doubt that the road ahead may be bumpy.

While we may be in interesting times today, together we can shape a global tax framework that is fair, sustainable, and continues to provide a global platform for economic prosperity for everyone.    

I hope you all enjoy this morning’s event.

Thank you