Minister for Finance Paschal Donohoe has told a European Parliament committee that he would vigorously make the case for Ireland's corporate tax rate as part of its national interest.

However, he said the idea of highly profitable multinationals paying more tax "over time" was "an important part of our future".

Speaking to the parliament’s ECON committee, Mr Donohoe said: "Do I believe that fiscal sustainability, that an element of that is larger companies who are more profitable paying more taxes over time?

"Do I think that’s an important part of our future? I do."

Mr Donohoe said that as a national competence, tax policy had to be exercised within "particular parameters" and that he wanted to see an agreement on how corporate tax is treated at international level being reached through the OECD.

"As Minister for Finance for Ireland I make the case for the ability of small and medium sized countries to be able to use a rate that is low, that is part of their competitive model," he told MEPs.

"I do accept that this is a form of economic sovereignty that needs to be increasingly exercised within particular parameters and inside particular guard rails.

"That is why I do want to see an agreement on this matter at OECD [level]. I’m trying to play a role within it, but as I play a role within it it is appropriate that I, as every other minister for finance does, vigorously make the case for our own national interest."

Mr Donohoe was addressing the committee as President of the Eurogroup, covering a range of issues, from the Covid recovery fund, fiscal policy and deeper integration of the eurozone economy.

On 5 June, G7 finance ministers reached agreement on global tax reform, expressing support for work at OECD and G20 level to address global corporate tax levels in light of the digitalisation of the economy and of globalisation in general.

The G7 Summit in Cornwall endorsed that position, calling it a significant step towards creating a fairer tax system.

The Irish government has said new global tax rules, currently being negotiated at OECD level, could ultimately cost the Irish exchequer €2 billion per year.

Mr Donohoe told MEPs: "As Minister for Finance for Ireland I'm going to play my role within that [OECD process], to see if we can get agreement. The fact that I’m acknowledging that this will deliver a revenue loss in Ireland, but I’m still willing to make a case for agreement, is a sign of my intent to do that."

Mr Donohoe told MEPs that as Eurogroup President he did not participate in tax discussion at the G7 summit.

"Tax matters are dealt with through ECOFIN [the body which brings together all 27 EU finance ministers].

"That is the entity of ministers that deals with taxation. Tax matters are not a mandate of the Eurogroup.

"That is why, when I attended the G7 as President of the Eurogroup, I did not play a role in relation to the communique and its reference with regard to global tax because the Eurogroup president does not play a role in regard to it."

Asked about the Northern Ireland Protocol, Mr Donohoe said the Irish government and the EU saw it as being the "safest and most effective way" in which to manage the disruptive consequences of Brexit that otherwise would have been created.

Describing it as a "very politically difficult area", he said the European Commission and British government were engaging on the issue.