Ireland's greatest enemy today resides in the White House, but paradoxically, it is Germany's greatest friend, at least from a fiscal point of view.
Biden has decided to finance at least part of its grand infrastructure plan by recovering the profits that American multinational companies are hiding overseas. The previous legislation, already improved by Trump, provided for a taxation of 10.5%, but only for profits that exceed 10% of the ROI. Then a large untaxed area was left. Biden's reform instead provides that profits made abroad are taxed at 21% without deductible. If taxes are paid abroad then the part paid elsewhere is deducted, but the tax burden must be at least 21%.
So for multinationals, the games in which they place their headquarters in Ireland to enjoy the lowest rates do not make sense: in any case they will pay 21%, and then it is better to put yourself where you are most comfortable, or you can find the staff more easily, or this costs less. A potential huge cost blow to the Irish economy, but also a lesson to the European Union that fails to enforce a minimum tax rate Biden has to come and teach you how to do things, which is ridiculous.
However, this move risks being a hard blow for Ireland, where rents are very expensive and average wages are over 4000 euros per month, compared to Italy's 2,700, for example. The only real "competitive advantage", tax avoidance, is likely to go away. What will be left of it after?
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/come-biden-rischia-di-mettere-fine-al-paradiso-irlanda-per-le-grandi-societa-di-internet-riuscira-in-quello-in-cui-fallisce-la-commissione/ on Fri, 07 May 2021 16:52:59 +0000.