Biden global tax proposal faces setback after Ireland Finance Minister objects

Biden global tax proposal faces setback after Ireland Finance Minister objects

Washington, May 26, 2021: US President Joe Biden’s push to get major economies to agree to a 15 percent minimum tax rate for multinational corporations has hit a snag after Ireland’s Finance Minster said he had “significant reservations” about the plan.

The objection from the Finance Minster Paschal Donohoe on Tuesday carries weight since Ireland has an outsized number of technology and pharmaceutical firms that operate in the country for its lower tax rate. Donohoe expressed his views on Sky News saying, “We do have really significant reservations regarding a global minimum effective tax rate status at such a level that it means only certain countries, and certain size economies can benefit from that base, we have a really significant concern about that.”

His objections come as Finance Ministers from the Group of Seven advanced nations are set to meet one week from now in London, where they could endorse the US proposition. Biden’s administration a week ago called for unified tax rate of minimum 15% in negotiations with the Organization for Economic Cooperation and Development and G20.

Top European Union economies France and Germany said they would support a tax at that level, and the IMF’s chief on Tuesday endorsed it too. An individual near the G7 talks disclosed to press that they anticipate a political understanding one week from now, however two others with information on the matter said member states may opt for a less definitive measure.

Finance chiefs have portrayed the minimum tax as necessary to stem competition between nations over who can offer multinationals the most reduced tax rate. They say that “race to the bottom” saps revenues that could go to other government spending needs.

For Biden, a minimum global tax rate would help keep up US competitiveness since he has proposed hiking domestic corporate taxes to pay for a jobs and infrastructure program with a sticker price of around $2 trillion.Treasury Secretary Janet Yellen will represent the United States at the following week’s gathering, and her deputy, Wally Adeyemo, told Reuters on Monday that he hopes to see “a lot of unified support” for the arrangement from the G7 countries.

French Finance Minister Bruno Le Maire a week ago called the 15% proposition “a good compromise.” IMF Managing Director Kristalina Georgieva said building up a minimum global tax rate would be “an advantage,” and something the Washington-based lending specialist has since quite a while ago upheld.

In a discussion with the Washington Post, she shared her views on the support for the global minimum corporate tax saying, “Why? Because when we have it, there is no race to the bottom and less tax evasion, that means more money in the public purse to invest in education and healthcare, and infrastructure, digitalization, all the good things we recognize we have to invest more into.”

She also acknowledged the challenge in finding “the sweet spot” for the global economy between those priorities and the best rate for national governments, given some countries have relied on low tax rates to compete for revenue.

Ireland is among that group, and according to Sky News, Donohoe said it intends to hold its corporate tax rate at 12.5 percent for a few more years. Last month, Dublin’s finance ministry released a projection saying it could lose $2.4 billion each year in revenue starting in 2025 if a global minimum tax rate is enacted.

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