Politics Ireland, loved by Biden, is obstacle to tax deal
UK, EU seek to avert 'sausage war' in post-Brexit talks
LONDON (AP) — The U.K. is calling on the European Union to show pragmatism and “common sense,” as the two sides meet to resolve differences over the implementation of their post-Brexit trade deal in Northern Ireland. Britain’s chief official in the talks, David Frost, made the comment after his European Union counterpart said the bloc was ready to act “firmly and resolutely” if the U.K. failed to honor its commitments under the agreement. Frost and EU chief negotiator Maros Sefcovic are meeting Wednesday in London amid rising tensions in Northern Ireland, the only part of the U.K. that shares a land border with the EU.
One of the countries that poses a major obstacle in the push toward a global minimum tax rate has deep ties to President Biden.
Ireland, a tax haven for many household name companies, would lose out if major industrial countries move forward with plans to subject multinational corporations' income to a tax rate of at least 15 percent.
Finance officials in the wealthy Group of Seven (G-7) countries, which does not include Ireland, backed a global minimum tax rate of at least 15 percent in a deal announced over the weekend. The agreement is a win for the Biden administration, but many challenges remain before any international tax deal is finalized by a larger group of countries.
Biden's confiscatory tax plans unleash class warfare
Confiscatory tax policies make citizens worse off overall in the name of redistributing resources from the wealthy to the poor. But they ignore the fact that the taxes are imposed on those responsible for the investment that creates jobs. The new administration and its allies in Congress are trying to use the politics of envy and class warfare to argue that low- and middle-income can get ahead only with massive redistribution by the government, instead of economic growth spurred by a dynamic private economy driven by free choice.
"This effort is far from over," Treasury Secretary Janet Yellen said during a press conference Saturday after the G-7 finance ministers met in London.
More than 100 countries are participating in international tax negotiations at the Organization for Economic Cooperation and Development (OECD), a group that includes Ireland. Part of those negotiations are focused on establishing a global minimum tax.
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"I look forward now to engaging in the discussions at @OECD. There are 139 countries at the table, and any agreement will have to meet the needs of small and large countries, developed and developing," Irish Finance Minister Paschal Donohoe said Saturday on Twitter after the G-7 announcement.
Donohoe, who met with Yellen during the G-7 finance ministers' meeting, told The Irish Times that in their talks he "continued to make the case for legitimate tax competition within certain boundaries and for the role of small- and medium-sized economies in the agreement that is yet to come."
An effective and politically viable option for corporate tax reform
Together with a 25 percent corporate tax rate, the Biden administration should adopt the 15 percent corporate minimum tax rate coming out of the G-7 meeting, instead of the proposed 21 percent minimum rate. The 15 percent minimum rate is likely to attract broader support from the G-20 finance ministers, who meet later this summer. Moreover, if most industrialized countries adopt a minimum 15 percent rate, then American companies would be at a competitive disadvantage with a 21 percent U.S. minimum rate. In sum, Congress should pass a 25 percent corporate tax rate with a 15 percent minimum tax on foreign profits of U.S.
A global minimum tax rate of 15 percent would have a significant impact on Ireland and its 12.5 percent rate, making it an attractive country for many multinational companies to set up offices.
The pushback from Ireland could also strain relations with a country beloved by Biden. The president, who is often outspoken about his Irish heritage, has already met with Ireland's prime minister, Micheál Martin, since taking office.
During the virtual meeting on St. Patrick's Day, Biden reaffirmed U.S. support for the 1998 Good Friday Agreement that ended the conflict in Northern Ireland.
But the Biden administration also has made it a top priority to reach an OECD agreement on a global minimum tax, viewing such a deal as a way to ensure American companies won't become less competitive if the U.S. raises its corporate tax rates. Biden has proposed paying for his infrastructure plan in part by increasing the corporate tax rate from 21 percent to 28 percent and by increasing an existing minimum tax on U.S. companies' foreign earnings to 21 percent.
Biden’s $6 trillion budget proposal would rebuild America’s social safety net
Biden’s first budget aims to herald a new era of big governmentAs proposed, the budget would reinvest in infrastructure and education, raise taxes on the wealthy and corporations, and meet many — but not all — of Biden’s campaign promises. It also represents the most substantial expansion of the federal government’s spending powers since World War II and a direct rebuttal of the small-government principles of his Republican, and even many Democratic, predecessors.
On Saturday, the G-7 finance ministers issued a statement expressing commitment for a global minimum tax rate of at least 15 percent, the rate the Treasury Department pitched to OECD negotiators last month. The United States, Canada, France, Germany, Italy, Japan and the United Kingdom comprise the G-7.
The Biden administration lauded the G-7 finance ministers' announcement as historic and said a global minimum tax would encourage countries to compete for businesses based on factors other than taxes.
"The G-7's endorsement is another example of America reasserting its leadership on the world stage," White House press secretary Jen Psaki said during a press briefing Monday.
Jake Sullivan, Biden's national security adviser, said during the same briefing that Biden and other G-7 leaders would endorse a global minimum tax of at least 15 percent at a summit this week in the United Kingdom.
An agreement on a global minimum tax wouldn't require countries to raise their corporate tax rates. Rather, it would encourage countries to have mechanisms to ensure that their companies are paying a minimum level of tax on their foreign earnings.
Biden to get warm welcome from relieved but wary allies
LONDON (AP) — When U.S. President Joe Biden flies to Europe this week, he will find his hosts welcoming but wary. His predecessor Donald Trump may be gone, but he leaves a long shadow. Biden’s first foreign trip as president starts Wednesday and includes a gathering of the Group of Seven wealthy nations by the seaside in southwest England, a NATO summit, a meeting with European Union chiefs, and then a tete-a-tete in Geneva with his Russian counterpart and adversary, Vladimir Putin.For most of America’s allies, Biden is a relief.
Still, there are hurdles to a global minimum tax becoming a reality.
Negotiators are hoping for a political agreement at the Group of 20 (G-20) finance ministers meeting next month in Italy and for the OECD to finalize an agreement in the fall. But a number of countries outside the G-7 have raised concerns, including countries such as Ireland and Hungary that have corporate tax rates below 15 percent. Ireland is part of the European Union, which is a member of the G-20.
Yellen in her Saturday press conference noted that there are some countries with concerns and that countries will be working on some of the specifics of an agreement ahead of next month's G-20 meeting.
"This isn't a finished agreement," she said. "There are details still to be worked out."
Yellen said that she hopes the G-20 endorses an agreement and that many countries participating in the OECD negotiations will sign on to an agreement if it's backed by the G-20. But she also noted that an agreement would include an enforcement mechanism that would "essentially put pressure" on countries that don't adopt the agreement to abide by a minimum tax.
In addition to concerns by some countries, there are other hurdles to both a deal and implementation. For example, countries will need to reach an agreement on the tax base for a global minimum tax.
ProPublica's bombshell tax investigation reportedly has lawmakers eyeing policy changes. One senator who designed a key corporation tax cut says it wasn't supposed to let 'multibillionaires' avoid tax.
Republican Sen. Patrick J. Toomey, who authored 2017 tax reforms, said his intention "was not that multibillionaires ought to pay no taxes."The nonprofit news site ProPublica published a report on Tuesday showing how much the 25 richest Americans - including Jeff Bezos, Elon Musk, Warren Buffett, Bill Gates, and Mark Zuckerberg - paid in tax. The report highlighted how two key tax loopholes benefit billionaires.
"There is a lot of serious policy and technical work to be done for this to actually work," said Daniel Bunn, vice president of global projects at the Tax Foundation.
Some following the negotiations closely expressed optimism about a G-20 agreement.
"I think it's got a pretty good shot," said Maury Peiperl, dean of the George Mason University School of Business, pointing to the decline in corporate tax rates over the past several decades and the need for a correction.
Along with the efforts on a global minimum tax, the OECD is also working on an agreement about the location of where large corporations' profits are taxed. The OECD is aiming to reach a deal on both issues at the same time.
Once an agreement is finalized by OECD negotiators, countries will need to update domestic laws, and likely also tax treaties, in order to implement a deal. Congress would be involved in U.S. implementation.
The chairmen of Congress's two tax-writing committees - Sen. Ron Wyden (D-Ore.) and Rep. Richard Neal (D-Mass.) - said in a statement that they look forward to reviewing the G-7 deal and "applaud the Biden Administration's leadership in working to level the international playing field and support American workers."
But the top Republicans on the committees - Sen. Mike Crapo (Idaho) and Rep. Kevin Brady (Texas) - expressed some reservations, saying in a statement that "it remains to be seen whether any agreement will result in consensus from the United States' biggest foreign competitors."
Crapo and Brady added that they "continue to caution against moving forward in a way that could adversely affect U.S. businesses, and ultimately harm American workers and jobs at a critical time in our country's economic recovery."
Don't imperil NI peace, Biden to warn UK and EU .
The US president will warn that UK-EU negotiations must protect the Good Friday Agreement, his adviser says.The US president will tell fellow leaders at this week's G7 summit that gains since the Good Friday Agreement must be protected, Jake Sullivan said.