Pressure builds on Ireland as Luxembourg, France back Joe Biden's tax plan

Proposal to tax the overseas profits of US multinationals at a minimum of 21% is widely seen as undermining the advantages to Ireland from the low level of 12.5% corporation tax

US president Joe Biden put the weight of the White House behind securing support from the big countries in EU for an upheaval in the way multinationals are taxed, under an initiative driven by the OECD. Picture: Evan Vucci/AP

The pressure on Ireland's decades-old 12.5% corporation tax regime has come under further pressure as Luxembourg backed the global reform plans of the US, while France weighed in with a minimum global tax rate.   

US president Joe Biden last week put the weight of the White House behind securing support from the big countries in EU for an upheaval in the way multinationals are taxed, under an initiative driven by the OECD.  

His plan to tax the overseas profits of US multinationals at a minimum of 21% is widely seen as undermining the advantages to Ireland from the low level of 12.5% that helps attracts so many US investments here.         

French finance minister Bruno Le Maire told reporters today that he too welcomed the latest US proposals to unblock international negotiations, adding that they are a good starting point. 

He said he was open to a global minimum corporate tax rate above the 12.5% under discussion so far in the negotiations after Washington proposed a rate of 21%. Luxembourg had also welcomed the US plans.  

The US offer for a global deal on corporate taxes is well-timed and a positive step toward promoting solidarity in the treatment of multinational companies, its finance minister Pierre Gramegna said.

“The proposals of the Biden administration go in the right direction, and in the best interests of both Europe and the United States. 

Mr Gramegna added a note of caution that Luxembourg and other European counterparts might still have reservations with the plan if it advances.

“It’s clear that some European countries — for example, small open economies like the Benelux countries, Scandinavian countries, Ireland —  have specific considerations to value and to put forward that need to be taken into consideration,” he said. 

“But I think the global direction is the right one. We need more solidarity, we need to break the mould of many multinationals trying to reduce their taxation close to zero, and that’s been recognised by all observers: We must avoid a race to the bottom. 

Mr Gramegna added that Luxembourg is “very pleased that this discussion is taking place”.

The US offer to the nearly 140 countries participating in OECD talks suggests nations should be able to tax more corporate profits based on revenues within their borders. 

• Additional reporting Reuters, Bloomberg