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Risks to Ireland From Global Corporate Tax Reform Are Distant

This commentary highlights potential challenges to Ireland stemming from reforms to the global tax landscape. International corporate tax reform as currently envisioned by the OECD/G20 has two main pillars, each with possible varying effects on Ireland's budget, its existing capital stock, and future direct investment. In DBRS Morningstar's assessment, consensus around global tax reforms will be difficult to achieve and implement. Furthermore, the consequences for Ireland would depend on which pillars of reform are agreed upon and how the Irish government and the corporate sector respond. DBRS Morningstar is of the view that Ireland (A (high) Stable), while likely to see some reduction of corporate tax receipts if global tax reforms progress, has a broad revenue base and proven institutional capacity to adjust its public finances. Ireland also has advantages that keep it competitive should reforms threaten the country's economic model.

Key highlights include:
• Ongoing efforts to reform the global corporate tax system risk reducing Ireland's corporate tax base.
• The government has already started to adjust revenue expectations to accommodate such a shock.
• Ireland has significant non-tax benefits that should keep it competitive, even if reforms cause more structural change to the Irish economic model.

“Changes to the international corporate tax landscape will most likely reduce Ireland’s corporate tax base. The government already expects this,” said Jason Graffam Vice President in the Global Sovereign Ratings Group. “But there is a long road to travel before adjustments to the global tax environment force structural change to Ireland's macroeconomy.”