The European Union showed signs of frustration over US President Donald Trump’s recent move to withdraw from a global tax deal backed by the Organisation for Economic Co-operation and Development (OECD). The decision could pave the way for tax havens to siphon off funds from larger economic blocs, a prospect that concerns the EU deeply.
Speaking with CNBC on January 22, European Commissioner for Trade Valdis Dombrovskis expressed worry about the potential consequences. Under the OECD framework, a 15 percent minimum tax rate would be implemented, which is higher than some European jurisdictions currently impose. “The US was very much behind this global tax deal and was helping ensure its success,” Dombrovskis pointed out on the sidelines of the World Economic Forum.
He continued, “The US, the EU, and the global community share common interests in this tax deal to ensure multinational corporations are paying their fair share, not hiding profits in offshore tax havens.” Dombrovskis emphasized that Europe now needs to engage with the Trump administration to find alternative solutions to prevent corporate tax dollars from disappearing into tax havens.
The issue also raised alarm at the national level within the EU. Irish officials, particularly within the Department of Finance, expressed concern about the sudden shift in policy. The Irish Times reported on January 22 that the country’s state agency for promoting foreign investment, IDA Ireland, was examining Trump’s memorandum on the OECD deal.
“Ireland signed up to the OECD deal in October 2021, and IDA Ireland appreciates the clarity the agreement provides for client companies, helping them make informed investment decisions,” the agency said in a statement. However, it acknowledged that while tax is crucial, other factors also play a significant role in attracting foreign direct investment (FDI) to Ireland. The agency added it would continue to work with the Department of Finance on the specifics of Trump’s decision.
Ireland heavily depends on corporate tax revenue from US companies. According to data from the Irish government, by the end of August 2024, the country had collected nearly €60 billion in taxes, with over €16 billion stemming from corporate tax receipts.
Dombrovskis also voiced concerns over Trump’s threats to impose tariffs on foreign goods, stating that the European Commission was already in direct talks with the US administration about the matter. “We are engaged with the US administration. We’ve already started discussions,” he confirmed. He emphasized the EU’s desire for a “pragmatic way forward” and warned that tariffs could lead to “global economic fragmentation,” which would harm international trade and investment relations.
