US President Joe Biden is proposing a new global minimum tax rate for American multinational companies, in a move that could potentially impact the attractiveness of Ireland as a location for foreign direct investment from US firms.
Under proposals unveiled today as part of a new $2tn infrastructure plan, the White House said the President's tax reforms would increase the minimum tax on US corporations overseas earnings to 21%.
The tax would also be calculated on a country-by-country basis "so it hits profits in tax havens", the White House said.
The move by the US administration could make Ireland's low 12.5% corporation tax rate less attractive to American companies looking to invest overseas, as they may have to pay an additional tax on their profits to the US government.
Instead Ireland would have to sell itself harder as an FDI destination based on attributes such as the skilled workforce, proximity to the UK and mainland Europe and the English speaking workforce.
The measure is one of a number of tax changes being proposed by the White House in order to pay for the new infrastructure plan.
It also aims to eliminate the rule that allows US firms to pay no tax on the first 10% of their return when they locate investments in foreign countries.
"By creating incentives for investment here in the United States, we can reward companies that help to grow the US economy and create a more level playing field between domestic companies and multinationals," the White House said in a briefing document.
Other aspects include an increase in the US corporate tax rate from 21% to 28%.
"This will help fund critical investments in infrastructure, clean energy, R&D, and more to maintain the competitiveness of the United States and grow the economy," the statement said.
If it is passed by Congress, which isn't guaranteed, the plan would also see an end to the practice of inversion, where US companies can avoid paying taxes by switching their headquarters to different countries.
"President Biden is also proposing to encourage other countries to adopt strong minimum taxes on corporations, just like the United States, so that foreign corporations aren't advantaged and foreign countries can't try to get a competitive edge by serving as tax havens," the White House said.
"This plan also denies deductions to foreign corporations on payments that could allow them to strip profits out of the United States if they are based in a country that does not adopt a strong minimum tax."
The administration has also reiterated its commitment to reaching a global agreement on a strong minimum tax through multilateral negotiations, currently underway through the OECD.
The $2 trillion infrastructure package pledges to invest in traditional projects like roads and bridges alongside tackling climate change and boosting human services like elder care.
Coupled with his recently enacted $1.9tn Covid-19 relief package, Mr Biden's infrastructure initiative would give the US federal government a bigger role in the economy than it has had in generations, accounting for 20% or more of annual output.