Biden’s political problems could jeopardise OECD corporate tax deal

As if there wasn’t enough uncertainty heading into 2022, the political problems of the Biden administration have cast doubt over the OECD corporate tax deal. If US president Joe Biden can’t get his Build Back Better Bill – which includes the US version of the minimum corporate tax plan – through the Senate, then there are doubts about the timetable for a deal and even a risk that it all falls apart.

So the reaction in Dublin to the European Commission’s publication of a draft directive to give legal effect to the minimum 15 per cent rate across the EU is interesting.

The Department of Finance said in a statement that it would support the French presidency's efforts to get the directive passed in the first half of 2022, with a view to having the legislation enacted here in next year's Finance Bill.

With the US approach in the balance, Ireland could have decided to call for a wait-and-see approach in Europe. But on balance it seems the decision has been made to support the French approach to get the directive through and tie down the 15 per cent rate.

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Having won support at OECD level for the 15 per cent rate – rather than " at least 15 per cent" – Minister for Finance Paschal Donohoe will see advantage in now tying this down at EU level and settling it once and for all.

It would not be ideal for Ireland if the US is not fully on board. And there could be international tensions if the OECD process does not conclude because of this.

Ireland gained hugely from the first phase of OECD reform, as shown in the explosion in corporate tax receipts after 2015. The second reform programme was always going to carry dangers for the country.

Its political progress had seemed inevitable and it is ironic that the Biden administration, which gave new life to the OECD process earlier this year, is now the main cause of doubt about whether it can all be finally tied down and implemented.