US President Joe Biden’s push to get major economies to agree on a 15 percent minimum tax rate for multinational corporations has hit turbulence after Irish Minister for Finance Paschal Donohoe expressed “significant reservations” about the plan.
The objection from Donohoe on Tuesday carries weight because Ireland hosts an outsized number of technology and pharmaceutical firms that were attracted to the country for its lower tax rate.
“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,” Donohoe told Sky News.
His objections come as G7 finance ministers are set to meet next week in London, where they could endorse the US proposal.
Biden’s administration last week called for an agreement on a unified tax rate of a minimum of 15 percent rate in negotiations with the Organisation for Economic Co-operation and Development and the G20.
The EU’s top economies, France and Germany, said that they would support a tax at that level, and IMF managing director Kristalina Georgieva on Tuesday also offered her endorsement.
A person close to the G7 talks said that they expect a political agreement next week, although two other people with knowledge of the matter said that member states might opt for a less definitive measure.
Finance ministers have characterized a minimum tax as necessary to stem competition between countries over who can offer multinationals the lowest rate.
They have said that a “race to the bottom” saps revenue that could go to other government priorities.
For Biden, a global tax agreement would help maintain US competitiveness, as he has proposed hiking domestic corporate taxes to pay for an infrastructure and jobs program with a price tag of about US$2 trillion.
US Secretary of the Treasury Janet Yellen is to represent the US at next week’s meeting and US Deputy Secretary of the Treasury Wally Adeyemo on Monday said that he expects to see “a lot of unified support” for the plan from the G7 nations.
French Minister of Finance Bruno Le Maire last week called the 15 percent proposal “a good compromise.”
Georgieva said that establishing a global minimum tax would be “a benefit,” and something the IMF has long supported.
“Why? Because when we have it, there is no race to the bottom and less tax avoidance,” Georgieva said on Tuesday during a conversation with the Washington Post.
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 said.
A projection released last month by the Irish Department of Finance showed that the country could lose 2 billion euros (US$2.45 billion) in revenue each year starting in 2025 if a global minimum corporate tax rate was enacted.
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