The Administration’s global tax proposal could make Ireland less attractive for US tech giants.
Over the past few decades, Ireland has been able to attract huge investment from US tech firms by offering very favorable corporate tax rates. These sweetheart tax deals have allowed major US firms to pay little to no tax on their non-US revenue.
But if Joe Biden gets his way, that may change.
An American colony in Dublin
In Dublin’s Docklands district, U.S. tech companies have found a haven. Google has its international headquarters across a campus of offices and will soon have more space nearby at the Boland’s Mill development. Just across the canal, Facebook has its international HQ with Tripadvisor and AirBnB close by.
Stripe, the San Francisco based online payments firm, may also be moving into the neighborhood. Last month its Irish founders said they’re planning about 1,000 new jobs in Ireland.
But there’s now a risk that the pipeline of investment from the US could dry up if President Joe Biden can lead a major change to global tax rules.
The party may be over for Irish tax deals
For the last 20 years Ireland has sung a siren song of low taxes to attract businesses – and jobs – to the Emerald Isle. Invest in Ireland, the song goes, and you will pay just 12.5% tax on your Irish profits.That is a mere fraction of other EU corporate tax rates of 19% in the UK, 30% in Germany and 33.3% in France.
But that tax advantage – at least for US companies – may be threatened if President Biden’s tax plan goes through. A big part of that tax plan is a “global minimum corporate tax rate.” The US Treasury Secretary Janet Yellen has suggested a that minimum rate could be 21%.
“We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom,” Yellen said in a speech last week. “Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations.”