Last year’s landmark OECD corporate tax deal was greeted as a significant international agreement to ensure big business paid its fair share. But it seems a case of “many a slip” as actually implementing what was agreed is proving hugely challenging. Hopes of having the deal operational by next year have already been abandoned in favour of a 2024 deadline – and even this is now in serious doubt.
The central problem is that the Biden administration is struggling to get a package of tax proposals through Congress, including measures which would implement the 15 per cent minimum corporate tax rate, a central part of the OECD deal. This week, negotiations on a compromise budget plan collapsed, due largely to the opposition of conservative Democratic senator Joe Manchin. This threatens to scupper the president’s economic agenda, including plans for massive environmental spending paid for by tax rises. Manchin is able to calls the shots due to the 50/50 split of seats in the Senate. Democrats now fear that if they lose control of Congress in mid-term elections later this year, their plans will be permanently on ice.
Moves to agree the other part of the OECD plan – the reallocation of taxing rights to countries where big multinationals do business – continue, but a final deal on details is not due until the middle of next year. Meanwhile in the EU, Hungary continues to hold out against the imposition of the minimum 15 per cent rate. France and Germany are now trying to hatch a plan to allow the 15 per cent rate to go ahead in Europe though the enhanced co-operation process, which would effectively allow countries to opt out if they wished.
The Republic would be seen as likely to opt in, which means the 15 per cent rate would be introduced here, probably by 2024. Were this to happen, the part of the OECD deal which raises more cash for the Irish exchequer would be implemented, but the other part – which would move some taxing rights away from Ireland – could remain stuck. Every cloud, it seems, has a silver lining.
