The world of corporate tax is changing, and Ireland is in the spotlight
OECD tax chief is confident the latest signals from Washington and the response from other capitals paves the way for a tax deal
What Ireland does with its 12.5% tax rate will be framed by what the US Congress decides, but also by what global minimum is agreed by the OECD. Photograph: Getty Images
The corporate tax world is changing, and Ireland needs to accept this. That was a key message from Frenchman Pascal Saint-Amans, who heads the OECD’s tax department, speaking in an interview with The Irish Times.
As the man at the centre of the OECD’s tax reform drive, no one is better qualified to see where this is going. And Saint-Amans is confident that the latest signals from Washington – the Biden administration is putting forward its own plans – and the response from other capitals paves the way for a deal.
Saint-Amans is now managing a process that will be influenced by changes in US domestic legislation, likely to be passed by summer. He indicated that G20 meetings in July and October would be key, which suggests final agreement may run beyond the previously suggested summer deadline. This could conceivably allow international agreement on a global minimum tax rate at a similar level to the rate the US sets for the earnings of its companies abroad – the so-called GILTI rate.
The US administration has proposed a 21 per cent GILTI rate, although the expectation is that agreement in Congress might be reached in the 15-18 per cent range. Interestingly, Saint-Amans noted that the taxation of US companies here is essentially a bilateral issue between Ireland and America.
What Ireland does with its 12.5 per cent rate will be framed by what Congress decides, but also by what global minimum is agreed by the OECD. Is it possible that Ireland could seek to reach some agreement with Washington on how this would all work? A delicate dance lies ahead for Finance Minister Paschal Donohoe as the proposals go through Congress and the OECD process comes to a head.
Ireland is in the spotlight. Most of the profits made by US companies based here were channelled through Irish subsidiaries, using a variety of tax structures based on the interplay between Irish and US laws. The Government will welcome Saint-Amans’ view that Ireland is not a tax haven, but it will also realise that he will see us as a vital player when the talks reach a crunch stage.