The EU just took another step toward endorsing Treasury Secretary Janet Yellen's international corporate tax reform plan by reportedly sidelining a European "digital tax" that would have mostly impacted American tech firms. Brussels is moving ahead despite Ireland's reservations about the plan (which we'll get in to below).
To make the deal more palatable for countries like Ireland, the US is offering a bigger piece of tax revenues from American multinationals, including Facebook and Google, to be distributed based on where those companies operate. In exchange, the world would agree to maintain a higher minimum corporate tax rate, helping to de-incentivize American firms from trying to move out of the US (it's critical if the Biden Administration wants to offset its spending-heavy agenda with the biggest tax hikes in decades.
The AP reports that the European Commission is putting the levy on ice to allow for "smooth cooperation on the political and technical hurdles that still need to be addressed on the G-20 tax decision before the end of October.
"Successfully concluding this will require a final effort, a final push from all parties. And the (EU) Commission is committed to focusing on that effort," EU spokesman Dan Ferrie said. "For this reason, we have decided to put on hold our work on a proposal for a digital levy as a new EU resource during this period."
Finance ministers from the G-20 major economies endorsed a global minimum corporate tax of at least 15%, a measure aimed at putting a floor under tax rates and discouraging companies from using low-rate countries as tax havens.
However, as the FT reported last week, Ireland, a key member of the EU when it comes to these global tax negotiations (since it has one of the lowest minimum corporate tax rates in the developed world) is still reluctant to fully commit to the OECD's overhaul, what would be the biggest revamp of global corporate tax laws in a century.
Ireland has reaped the economic rewards of a rock-bottom tax rate more than any other country (with the possible exception of Singapore).
The FT cited Intel, which has invested $15 billion and created more than 5K direct jobs at a sprawling campus where it makes chips and develops artificial intelligence tech, as an example of the policy's successes. The company, attracted by the low taxes, donates equipment to local schools and pulls out its checkbook for community groups and charities in neighboring villages..
"If you throw a stone, it’d land on someone who has worked, or someone who currently works, at Intel," says local councillor Bernard Caldwell.
"We’re the enemy of a lot of towns and cities because of what Intel put in."
Complying with the international tax reform could lead to economic devastation in Ireland's company towns. And they only need to look to the American rust belt - to towns like Buffalo, Youngstown and Detroit - to see what might lie in store for them.
You can read this article as it originally appears at Zero Hedge here.
The Australian government announces the New World Order is here.
(PHOTO: EU Commission/Pool/Anadolu Agency via Getty Images)