Biden’s international tax objectives call for rethink in Ireland

Direction of US president’s foreign policy puts State’s relations with EU, UK and US in question

US president Joe Biden’s taxation and investment policies are closely linked as well to his policies on China.  Photograph: Alex Wong/ Getty

US president Joe Biden’s taxation and investment policies are closely linked as well to his policies on China. Photograph: Alex Wong/ Getty

 

Joe Biden believes that economic security is national security. That is why, as president, Biden will pursue a foreign policy for the middle class.”

This objective of Biden’s election manifesto is now a key priority in his domestic and foreign policies. They are closely linked in his proposed 28 per cent US corporate tax rate and a global minimum effective rate of 21 per cent levied on any country with a lower rate.

The extra revenues will help finance his historically ambitious investment plans to recover from the coronavirus pandemic, invest in infrastructure and strengthen the US welfare state.

Ireland’s potential tax losses from such a deal have been estimated to be as high as €5-€6 billion per annum

This week French and German finance ministers said a deal is likely this year to trade off their accepting a global minimum rate in OECD talks with Biden accepting that a sales tax could be levied on US company turnover in other national jurisdictions. This would be a win-win outcome in transatlantic relations, easing the way to a wider entente between the United States and the European Union after former US president Donald Trump’s enmities.

Ireland’s potential tax losses from such a deal have been estimated to be as high as €5-€6 billion per annum because this State is directly targeted by these moves, along with Switzerland, the Netherlands, Singapore and Puerto Rico, as havens for mobile intellectual property and capital.

The pace and direction of Biden’s foreign policy put Ireland’s distinct triangular relationship with the EU, UK and US over the last generation in question for the next one. A rethink is needed in the context of Biden, Brexit and the EU’s search for strategic autonomy. It should apply to domestic policy on research, investment and language learning as to foreign policy positions.

Biden’s taxation and investment policies are closely linked as well to his policies on China. Immediately following his manifesto position on a foreign policy for the middle class came this further one: “To win the competition for the future against China or anyone else, we must sharpen our innovative edge and unite the economic might of democracies around the world to counter abusive economic practices.”

Whether that objective on China can be secured only by reviving US alliances with democracies is a major issue in the emerging debate about Biden’s foreign policy. His administration wants to repair the damage Trump did to US relations with Nato, the EU and other regional powers, and to continue the shift towards Asia and the more assertive approach to China which Trump inherited from his predecessor, Barack Obama. That may not be possible in a more multipolar and less liberal world order.

So argue two veteran US policy analysts Richard Haass and Charles Kupchan. They work together in the US Council on Foreign Relations and draw on their respective experience as foreign policy officials for the Bush, Clinton and Obama administrations. They say a “big part of the problem is that the existing international governance architecture, much of it erected soon after World War II, is outdated and not up to the task of preserving global stability. The US-centred alliance system is a club of democracies, poorly suited to fostering co-operation across ideological lines.”

'The most likely alternative to a great-power steering group – an unruly world managed by no one – is in no one’s interest'

Their case, set out in Foreign Affairs magazine, cuts across that made by the Biden team, which draws on a two-year study conducted by the Carnegie foundation from 2019. Instead of a club of democracies, Haass and Kupchan advocate a new concert of powers inspired by the Concert of Europe between Russia, the UK, Austria, Prussia and France which they say brought peace to this continent for 50 years after 1815.

They say “a global concert offers the best vehicle for managing a world no longer dominated by the United States and the West”. The members would be China, the EU, India, Japan, Russia, and the US. Collectively, these represent roughly 70 per cent of world GDP and global military spending.

They would meet regularly at a standing headquarters and would draw in regional organisations like the African Union or the Association of Southeast Asian Nations as needed in a forum to enable sustained strategic dialogue across ideological and geopolitical divides. It would sit atop the United Nations, like the G20 or G7 but be more structured.

To objections that this is an anachronistic reversion to a reactionary period in Europe, that competing interests would divide it and that it surrenders liberal internationalism prematurely, Haass and Kupchan say “the most likely alternative to a great-power steering group – an unruly world managed by no one – is in no one’s interest.” Will US allies – and Biden’s middle class – agree?

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