A global deal on corporate tax looks set to bring to a climax a deep-seated European Union battle, pitting large members Germany, France and Italy against Ireland, Luxembourg & Holland.
The smaller EU partners at the centre of a long struggle over their favourable tax regimes welcomed the Group of Seven deal on June 5 for a minimum corporate rate of at least 15%.
But some critics predict trouble in implementing it.
The European Commission, the EU's executive, has long struggled to get agreement within the bloc on a common approach to taxation, a freedom which has been jealously guarded by all its 27 members, both large and small.
"The traditional EU tax holdouts are trying to keep the framework as flexible as possible so that they can continue to do business more or less as usual," Rebecca Christie of Brussels-based think tank Bruegel said.
Finance Minister Paschal Donohoe, who is also president of the Eurogroup of his euro zone peers, gave the G7 wealthy countries' deal, which needs to be approved by a much wider group, a lukewarm welcome.
"Any agreement will have to meet the needs of small and large countries," he said on Twitter, pointing to the "139 countries" needed for a wider international accord.
Meanwhile, speaking today the Tánaiste has reiterated the Government's position that it is standing over the 12.5% corporation tax rate.
Leo Varadkar said it had been a huge part of Ireland’s economic model and Ireland takes in around twice as much corporation tax per head of population than other countries.
"It is a very good example of how low taxes can result in higher revenues and we are going to push back very strongly against anything that may jeopardise that," he said.
He said comments from the two of the opposition parties in the Financial Times today were very unhelpful.
"They may not have realised it, but I think two of the opposition parties actually walked into a bit of a trap and they in their comments allowed people to create the impression that there wasn’t a political consensus behind our 12.5% rate anymore and that was damaging to the national interest in my view," he said.
"I just hope they will be more careful in what they say in the future because these things are said and are heard around the world."
He said the Government wants to be part of an OECD solution on corporation tax reform and it will be in the tent on global standards.
But he added that the position that the 12.5% rate stays remains.
Hans Vijlbrief, deputy finance minister in the Netherlands, said that his country supported the G7 plans and had already taken steps to stop tax avoidance.
Although EU officials have privately criticised countries such as Ireland or Cyprus, tackling them in public is politically charged and the bloc's blacklist of "uncooperative" tax centres, due to its criteria, makes no mention of EU havens.
Luxembourg's finance minister Pierre Gramegna welcomed the G7 accord, adding that he would contribute to a wider discussion for a detailed international agreement.
The Tax Justice Network ranks the Netherlands, Luxembourg, Ireland and Cyprus among the most prominent global havens, but also includes France, Spain and Germany on its list.
Europe's divisions flared up in 2015 after documents dubbed the 'LuxLeaks' showed how Luxembourg helped companies channel profits while paying little or no tax.
That prompted a clampdown by Margrethe Vestager, the EU's powerful competition chief, who employed rules that prevent illegal state support for companies, arguing that such tax deals amounted to unfair subsidies.
Vestager has opened investigations into Finnish paper packaging company Huhtamaki for back taxes to Luxembourg and investigating the Dutch tax treatment of InterIKEA and Nike.
The Netherlands and Luxembourg have denied the arrangements breach EU rules.
But she has had setbacks such as last year when the General Court threw out her order for iPhone maker Apple to pay €13 billion in Irish back taxes, a ruling which is now being appealed.
Vestager's order for Starbucks to pay millions in Dutch back taxes was also rejected.
Despite these defeats, judges have agreed with her approach.
"Fair taxation is a top priority for the EU," a spokesperson for the European Commission said: "We remain committed to ensuring that all businesses pay their fair share of tax."
The Netherlands in particular has underscored a willingness to change after criticism of its role as a conduit for multinationals to move profits from one subsidiary to another while paying no or low taxes.
It introduced a rule in January taxing royalties and interest payments sent by Dutch companies to jurisdictions where the corporate tax rate is less than 9%.
"The demand for fairness has grown," said Paul Tang, a Dutch member of the European Parliament. "And now it is combined with a need to finance investment."
G7 tax plan mildly credit negative for Ireland - Moody's
Meanwhile, credit rating agency Moody's said the commitment to a global minimum corporate tax rate of 15% on a country-by-country basis would be "mildly credit negative" for countries such as Ireland and the Netherlands.
Moody's said the authorities in these countries should have been preparing for a decline in corporate tax revenue should the Base Erosion and Profit Shifting (BEPS) negotiations bear fruit.
It pointed out that changes to the global corporate tax regime have been anticipated for several years and a number of jurisdictions have been taking action to prepare.
"For example, Ireland has budgeted for a gradual decline in corporate tax revenue of €2 billion (0.5% of 2019 GDP) by 2025, compared with a corporate tax take of almost €12 billion in 2020," Moody's said today.
"Such jurisdictions also have relatively significant economic strengths that go well beyond their competitive corporate tax offering," the credit rating agency added.
It also noted that the Netherlands has expressed its support for the G-7's plan and has been making changes to its tax legislation that will reduce its use as a tax haven.
From this year, it has been taxing outbound royalty and interest payments to jurisdictions where the corporate tax rate is lower than 9%, and this will also apply to outgoing dividends from 2024.