Biden's Minimum Corporate Tax Rate... Ireland Faces 'Distress'

Proposal for Global Minimum Corporate Tax Rate of 15%
Ireland Opposes After Attracting Investment with Low Corporate Tax

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] As U.S. President Joe Biden proposed setting a minimum corporate tax rate, opinions have been raised that growth stocks should be approached conservatively.

According to KB Securities on the 5th, President Biden recently abandoned the plan to raise the existing corporate tax rate from 21% to 28% to pass the infrastructure investment policy. Instead, he proposed a global minimum corporate tax rate of 15%. The full-scale discussion is scheduled to take place at the G7 summit on the 11th.

As a result, countries with corporate tax rates below 15% may be adversely affected by President Biden's proposal. As of last year, among global countries, the OECD member countries with corporate tax rates below 15% are Ireland and Hungary. KB Securities researcher Heo In-hwan said, "Particularly, attention should be paid to Ireland," adding, "Companies are expanding investments in Ireland due to its accessibility to the European market and low corporate tax rate."

Especially, the entry of tech companies into Ireland is active. Tech companies refer to companies showing growth based on new technologies. Companies that generate large profits but pay low corporate taxes are concentrated in Ireland, which is why these companies are targeted for taxation. Consequently, among major countries, only Ireland opposes President Biden's setting of a minimum corporate tax rate.

From the perspective of stock investors, it is necessary to consider that U.S. companies operating in Ireland could be affected by the minimum corporate tax rate setting. Researcher Heo explained, "Around July, when the tax increase issue may become prominent, growth stocks should be approached conservatively." However, among domestic companies, although some have entered Ireland, it is expected that the increase in the minimum corporate tax rate will have no impact, as the sales proportion in Ireland is negligible. Currently, domestic companies operating in Ireland include Kia, Celltrion Healthcare, and Webzen.