A study in 2018 concluded that around 40% of multinationals’ overseas profits are artificially shifted to low-tax countries
AS IS OFTEN the case in multilateral matters, America held the key. When Janet Yellen, its treasury secretary, announced earlier this year that it was time to end the “global race to the bottom” on corporate tax, her remarks supercharged sputtering talks over a global deal to overhaul how much tax multinational companies pay, and where.
. One official closely involved in the current talks thinks the deal taking shape could “all but kill the havens”. However, those places classed as tax havens come in various shapes and sizes, from taxless Caribbean paradises to merely tax-light hubs in Europe and Asia. Some have more to fear than others.
Better-connected economies that have traditionally been friendly to corporate-tax-planners are less easy to dismiss. Several European Union countries, such as Ireland and Cyprus, have lured investment with a low corporate-income-tax rate , or, as Luxembourg and the Netherlands have done, with rules that make them attractive conduits in tax structures, helping companies avoid tax in other countries.
Even a minimum rate of 12.5%, or only slightly above it, could cost Ireland, though, when you factor in tax breaks. Many big companies using it pay an effective rate in the single digits. The country’s “patent box”, a scheme for profits from innovation, charges just 6.25%. A firm paying, say, 8% might quickly tire of Irish charms if faced with a seven-percentage-point top-up. The government has pencilled in an annual tax-revenue loss from the putative global deal of €2bn —around 2.
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