Last year’s landmark OECD corporate tax deal has been hailed as an important international agreement to ensure big business pays its fair share. But it seems to be “several slippages”, as the actual implementation of what has been agreed is proving extremely difficult. Hopes of seeing the deal up and running by next year have already been abandoned in favor of a 2024 deadline – and even that is now in serious doubt.
The central problem is that the Biden administration is struggling to push a set of tax proposals through Congress, including measures that would implement the 15% minimum corporate tax rate, a central part of the OECD agreement. This week, negotiations over a compromise budget plan collapsed, largely due to opposition from conservative Democratic Senator Joe Manchin. It threatens to sabotage the president’s economic agenda, including plans for massive environmental spending paid for by tax hikes. Manchin is in a position to call the shots due to the 50/50 split of Senate seats. Democrats now fear that if they lose control of Congress in the midterm elections later this year, their plans will be frozen forever.
Efforts to agree the other part of the OECD plan – the reallocation of taxing rights to the countries where large multinationals do business – are continuing, but final agreement on the details is not expected before middle of next year. Meanwhile, in the EU, Hungary continues to resist imposing the 15 percent minimum rate. France and Germany are now trying to work out a plan to allow the 15% rate to go ahead in Europe through the enhanced cooperation process, which would effectively allow countries to opt out if they wanted it.
The Republic would be considered likely to participate, meaning the 15% rate would be introduced here, likely by 2024. If that happens, the part of the OECD deal that raises more cash for the Irish Treasury would be implemented, but the other part – which would take certain taxing rights away from Ireland – could remain stuck. Each cloud, it seems, has a silver lining.