Ireland is home to the European arms of Apple, Facebook, Google, and Microsoft—all of which are mainly there for the low taxes. Ireland has a 12.5% corporate tax rate, which is one of the lowest in the developed world, and it has been heavily criticized for it by other nations.
But in the new budget plans, Irish finance minister Michael Noonan announced he would go a step further— earnings from some research and development entered into a so-called “knowledge development box” will be subject to a 6.25% corporate tax rate.
That compares to the US’s corporate tax rate of 35%, before deductions. Ireland’s neighbor Britain has a headline corporate tax rate of 20%—not that any of the tech companies really pay it—though it also has a similar “patent box” tax relief system that can reduce corporation tax from 23% to 10% on profits.
Ireland is bucking the trend across the EU—even the UK is debating a so-called Google tax—and has come under fire from its European neighbors as well the US. The country continues to be criticized for being Europe’s unofficial offshore tax haven for giant multinational companies but the Irish government hopes the new tax incentive will encourage even more multinational companies to invest in the country.
The European Commission is currently investigating whether the country’s generous corporate tax schemes amount to unfair state aid. If Ireland’s tax treatments are deemed to be illegal, the tech giant Apple could be forced to pay Ireland back taxes.