Low corporation tax rates aren't the only reason foreign companies come to Ireland, an economist has said.
Ireland may soon need to change its approach to corporation tax after the G7 nations agreed to proposals for an introduction of a global minimum corporate tax rate.
They're proposing a minimum level of 15% - above Ireland's current rate of 12.5%.
It's part of a bid by the US and other large nations to ensure more revenue from large multinationals such as Google and Facebook is taxed in their original jurisdictions, rather than through their international operations.
The G20 and OECD will still need to sign off on the plans later this year, with Finance Minister Paschal Donohoe saying a final deal will have to "meet the needs of small and large countries" alike.
Conall Mac Coille, chief economist at Davy, told Newstalk Breakfast the final outcome will likely be "reasonably close" to what the G7 agreed yesterday.
He said: “It is a significant moment… this is clearly going to be the starting point of negotiations during the summer.
“There’s a real question mark as to whether the US will commit to an international agreement - can [Joe Biden] get that through [Congress]?
"There’s still a long way to go… but I don’t think we can dismiss what happened yesterday as being insignificant.”
He noted that 15% is only slightly above Ireland's current rate, and countries such as the UK are already planning to increase their corporation tax rates to 25%.
He explained: "We’ll still have a low rate if we decide to set it at 15%.
“I know people will be cynical, but there are other reasons why multinationals are here besides tax. Being in the EU single market is one of the key ones - and Britain is no longer in the single market, which will be a big negative for one of our key competitors.
“If we go to 12.5% to 15%, I don’t think there’ll be any great outflow of [foreign direct investment]."
He suggested that Ireland will likely need to be more worried about issues such as housing shortages, as those issues could turn off companies looking to operate here.
Mr Mac Coille said Ireland's corporation tax take is heavily dependent on a few major multinationals operating here, and we could lose around €2 billion a year under the current proposals.
However, he noted many companies already don’t have large chunks of their income taxed here, while an increased tax rate could offset some of the losses from more of companies' earnings being taxed abroad.
