Ireland has been focused on the OECD talks on global corporate tax reform, which G7 finance ministers are trying to progress at this weekend's talks in London. But arguably what happens in the US is just as important for Ireland – perhaps more so. And so Saturday's meeting on the margins of the G7 between Minister for Finance Paschal Donohoe and US treasury secretary Janet Yellen takes on a particular importance.
What happens in the US will be vital for Ireland given the huge presence of big American multinationals here. And the Biden administration is also a key player in the wider OECD talks.
The administration had proposed a 28 per cent corporate tax rate in the US and – crucially – a minimum rate of 21 per cent on the international earnings of US companies to help pay for new infrastructure investment. In compromise talks with Republicans in Congress on his proposals, the president has now offered a 15 per cent minimum tax rate as a potential deal for now, while saying the administration has the option of returning to the earlier plan at a later date.
If the OECD agrees a recommended minimum global corporate tax rate of 15 per cent, Ireland will have to decide whether to increase the 12.5 per cent rate. What happens in the US will be vital to this decision – as will a call on what a future US administration might do. How might a future Republican president tax the international earnings of US companies, for example?
The final part of the puzzle will be the EU, which would try to turn any OECD recommendation into something EU countries must adopt. Will Ireland get support to hold out against this from other countries? And how would this reflect on the State’s reputation?
It will be interesting to see how much emerges from the meeting between Donohoe and Yellen.
The Irish Minister argues that low tax is a legitimate tool of competition in attracting investment, but the US takes the opposite view. Ireland will stick to its argument to keep the 12.5 per cent rate for now, but a tough call may well lie ahead.
