Thread by @EdConwaySky

Exclusive: Big blow for Joe Biden as Irish finance minister tells me he has “significant concerns” with US proposals for global minimum corporate tax rate:
•No plans to change Ireland’s 12.5% rate.
•Expects it to be in place in 5/10 yrs time.
Story here: news.sky.com/story/ireland-…

Irish finmin tells @skynews:
- “sig reservations” abt Biden tax plans
- “proud of the part the 12.5% tax rate has played in our econ development”
- N Ireland protocol helped secure “the long term interests of the island [of Ireland], but “there are issues”

These comments from @Paschald represent the strongest reproach yet to the US president, who is seeking to persuade countries around the world to agree to a floor on corporate tax rates of 15% - the biggest potential reform to international biz taxes in a century.

Some background:
The Biden administration is, like most countries, frustrated that the global tax system, which dates back a century, allows companies to avoid tax by shifting profits to low tax jurisdictions.
One upshot is many countries have been cutting tax rates. Look:

Ireland’s 12.5% corporate tax rate isn’t quite the lowest on the planet, but it’s certainly one of the lowest in the developed world.
As @paschald argues, it’s been a key part (tho not the only part) of the country’s economic story, helping attract foreign investment.

The @OECD and @PSaintAmans have been pushing for global reform for years. But while most countries have talked a good game, they’ve stopped short of big changes.
In part it’s because it’s complex.
In part it’s because you need everyone to agree.

The upshot is we’ve had a bit of a mess.
Many countries, inc UK and much of Europe, are introducing digital services taxes on the tech giants.
The US clearly hates this.
And it doesn’t seem to prevent avoidance continuing.
We need a better solution. But what?

Tricky to distill into a tweet.
But here’s the OECD playbook:
1. Overhaul how u calculate taxes/apportion them to countries.
2. Ensure countries stop undercutting each other’s tax rates by encouraging them to keep rates above a minimum.
Explainer here: edmundconway.com/2021/04/why-jo…

The US under @JoeBiden & @SecYellen are pushing hard for no 2:
A global minimum corp tax rate which would prevent companies shifting profits.
If everyone’s tax rates are above a certain level then less chance they shift their profits/HQ.
Initial proposal for the rate: 21%

That level is quite high and met some initial resistance. Late last week they raised the proposed rate to 15%. However, as you can see that is still above Ireland’s 12.5%. Something’s still gotta give…

https://twitter.com/edconwaysky/status/1395460705952931844

That brings us to our @paschald interview. Recorded just before that US shift from 21% to 15%. But Irish finance ministry tells me their concerns still stand - and are “shared by many”:
- Rate too high
- Countries shd have sovereignty to decide their rates

Where does this leave us? Well if the global minimum is to become a reality (and both US and Ireland sound serious) they’ll have to compromise.
Perhaps the rate gets cut to 12.5% (not far off it now).
Or Ireland will have to buckle and raise their rate.
That wld be humiliating

Meanwhile, there’s widespread confusion abt what other countries are calling for in these negotiations. The UK has been widely reported as being against the global minimum rate. My understanding is this is wrong: they support the global minimum rate BUT (big but)…

Chancellor @RishiSunak wants the US to push not just for route 2 (👆) but also route 1.
In other words, we ALSO need a deal on how to calculate/apportion taxes too.
Otherwise, say HMT sources, the tech giants will just run riot, carrying on shifting profits.

Acc to Mike Devereux of @OxfordSBS: "A minimum tax rate would solve some probs but it wouldn't really get to the real problem of the international tax system, which is complexity... it creates a lot of problems, including economic efficiencies, but also profit shifting."

But complex as it is, this is a REALLY BIG DEAL.
The debate over global corporate tax rates and avoidance has been simmering for years. It looks like it’s about to boil over in the coming months.