One of President Joe Biden’s priorities is a historic overhaul of global tax rules. The world’s most powerful 20 economies are on board. But an island nation of 5 million people is standing in the way.
Biden still needs Ireland. For years, the country has successfully attracted hordes of global businesses with a corporate tax rate of just 12.5%, compared to 21% in the United States and 19% in the United Kingdom. Facebook (FB), Google (GOOGL) and Apple (AAPL) have set up regional headquarters in the country, while pharmaceutical companies like Pfizer (PFE) have built manufacturing hubs. Now, with 132 governments around the world in agreement on a minimum corporate tax of at least 15% to ensure big business pays its fair share, Ireland is digging in its heels.
“We are not in that agreement,” Finance Minister Paschal Donohoe recently told Irish media. Political pressure could yet force Ireland’s leaders to relent. Donohoe met with US Treasury Secretary Janet Yellen last week and said talks were productive. Yellen told reporters that Ireland, along with fellow European Union holdouts Hungary and Estonia, “want to find a way to get to yes.” But Ireland’s opposition highlights the obstacles that remain as governments try to transform public support for the ambitious project into actual policy. Ireland is thought to be holding out to see if Biden can rally enough support in Washington. And even if Ireland ultimately signs on, experts on European Union law think implementation in the bloc could be tricky. “These plans always take longer to implement and legislate than is talked about,” said Gary Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics.