Secretary Statements & Remarks

Remarks by Secretary of the Treasury Janet L. Yellen to the Institute of International and European Affairs in Dublin, Ireland

Thank you Director Collins and the IIEA for hosting this event.

Of course, I want to thank Minister Donohoe, too, for your warm welcome – but most of all, thank you for your friendship and your honest counsel these past several months. I have more to say about that in a moment, but for now, to all of you present here, as they say here in Ireland, “Dia daoibh.

This is my first visit to Ireland as Secretary of the Treasury, and I have enjoyed every minute of my stay in Dublin so far.  My only regret is that I am only here for such a short time.

U.S.-Irish Relations

Our two nations – Ireland and America – share much in common, not least that both our governments are currently run by Irishmen. President Biden, as this audience may know, is proud of his roots here.

It is not an uncommon affection. Every tenth American is an Irish American, and the people that Ireland gave to America gave their ideas back to the world.  The story of Ireland and America is the centuries old story of transatlantic exchange – the cross-migration of people and commerce.

Today, hundreds of U.S. companies make Ireland their European and international headquarters, and many of these U.S. companies have even been in Ireland so long that some people are surprised to learn they’re not Irish. 

Moreover, despite its small size, today Ireland is an important source of foreign direct investment to the United States. And not only are Irish firms a source of investment into the U.S., they are a source of employment in the U.S. too.  U.S.-Irish trade and investment is a two-way bridge that has and continues to benefit both countries tremendously. 

Alongside this deep bilateral trade and investment relationship, the U.S. and Ireland also cooperate on a wide array of economic and financial topics, including responding to the pandemic and setting the stage for a sustained global economic recovery.

Our two nations share a rich and storied past and have an important friendship today – but that is not why I am here. I am here because of how our two nations have recently agreed to help create a stronger, more sustainable, and more equitable global economy.

On October 8, a new era of multilateralism began in international tax – one that is aimed at serving the interest of everyday workers and families. 136 countries – Ireland and the U.S. included – agreed to modernize the laws of global commerce. For the first time in a century, nearly 95% of the world’s GDP has decided that we’re changing how corporations are taxed internationally, in part by imposing a minimum tax on corporate foreign earnings.

The agreement also includes strong provisions that will buttress and police the system, incentivizing countries to join and remain within it, helping to sustain minimum taxes around the world.

What does this mean for the world? For Ireland? For the U.S.? And for our relationship that has spanned the ocean and the centuries? That is what I would like to discuss here.

International Tax - Race to the Bottom

The best place to begin is by saying this wasn’t destined to happen. It is hard to change the world with the inertia of a century’s worth of history, and up until this moment, we lived with an international tax regime that was designed for the world as it existed in the 1920s.

Ireland and the U.S. were so much farther apart then. Every nation was. You could barely travel from New York to Dublin in under a week. If you wanted to send a message between the two cities, the fastest way to do it was via telegram, which would be sent by cable up through the Canadian border, where a clerk would transmit the message by way of Marconi Wireless to London and then here.

All this is to say, back then no one conceived of multinational corporations as they currently exist, or the global economy as it currently operates. But then, of course, the 20th century happened. Innovation accelerated. Corporations grew bigger and gained more market power while competition for mobile capital heated up. Borders became permeable. The planet got smaller. 

As the world changed, the international tax rules largely did not, leading countries and companies to interact in unintended ways which led to a race to the bottom in corporate taxation.

The race to the bottom has deprived our nations of the funding they needed to invest in themselves. In Ireland, as elsewhere, companies often paid much less than even a low corporate headline tax rate would suggest.

Tax competition among nations had created a beggar-thy-neighbor approach to government policy, where working and middle-class people around the world lost and no country could win in the long-term.

The system could not hold, and so the world began negotiations to change it. And now we’ve designed a new system – and a strong global minimum tax – that will serve the interests of everyday families and workers.

This global system, with its multilateral enforcement tools, will help ensure that large multinational corporations pay their fair share in Ireland, just as they will in the rest of the world. In so doing, it will provide greater social resources to ensure our citizens have access to childcare, education, and health, improving their lives substantially.

This system can enter all nations into a new and more productive form of competition. Instead of asking, “Who can offer the lowest tax rate?,” it will allow us to ask, “Which nation can offer the best physical and technological infrastructure, and most importantly, the most talented workers?.” In other words, we will compete on the basis of economic fundamentals.

International Tax – Ireland

Unlike the race to the bottom, this new race can have more than one winner. Both Ireland and the U.S. are well positioned to win that race.

Ireland’s competitive edge has long been far more than just a low corporate tax rate.  Ireland is “Exhibit A” of a country investing in human capital and creating the necessary business ecosystem for sustained growth.

However, perception often lags behind reality. Minister Donohoe and I have met several times this past year, and he helped me better understand just how “totemic” Ireland’s corporate rate is.

Yet Ireland’s investment in public education has created one of the world’s most educated workforces. A globally recognized brand of business certainty and friendliness, based on rule-of-law principles and institutions, has made Ireland a place companies want to be based.

Ireland is also the only English-speaking country in a post-Brexit EU, with impeccable transatlantic and European bona fides.

Although Ireland is small, it is one of the U.S.’s closest allies.  We know we can rely on Ireland be our ally not just in the world, but in Europe, and the United States’ values Ireland’s role as a bridge between the U.S. and the EU.   

Meanwhile, one just has to walk along Dublin’s “Silicon Docks” to see your success is founded on positive non-tax benefits.  Ireland is a place where real businesses center major activities; it has become one of the most attractive places in Europe to center the EU operations for many of the U.S.’s most innovative companies. 

It has always been Ireland’s openness, legal certainty, and conducive business culture that helped bring those companies to these shores. Those features can and will ensure continued success for Ireland.

But it’s never easy to make a seismic change; and Ireland’s support for this agreement is critical. And we view this agreement as a once in a generation event and change.

We deeply appreciate Ireland’s ability to adapt to a changing international tax environment.  We look forward to continuing our partnership in other areas, not least the inviolability of the Good Friday Agreement.

The global economy will only thrive by leveling the playing field for businesses and encouraging countries to compete on a positive basis. And that’s also why we are moving forward with international tax reform at home and working to go first to implement the global minimum tax in our upcoming reconciliation legislation, helping to lead the world to this better and more secure corporate international tax system.

International Tax – Stability and Certainty

I am proud of the new international tax deal because it not only provides benefits for everyday families, it will also stabilize the century-old international tax system.

Importantly, the deal ends the chaotic array of digital services taxes that have discriminated against Irish and US companies. This should put an end to tax and trade disputes that could otherwise hamper economic growth and business investment.  And it does so in a way that addresses the growing dissatisfaction that had arisen with a set of rules and norms that failed to account for the fact that with modern technology, companies in a wide variety of sectors can be deeply involved in economies where they do not have headquarters or physical operations. 

The new reallocation of taxing rights under the agreement instead recognizes that in the modern economy, a business can be meaningfully involved in the economic life of a jurisdiction without having physical presence in that jurisdiction.   

The new international tax deal will also achieve a fairer balance of the revenue needs of all nations. This will, in turn, ensure that the new rules endure, providing much needed tax certainty to taxpayers and corporations around the world.

And so, now all countries move forward together, just as they have in the past – with one important difference. We are not pitted against one another anymore. For the United States to prosper, our neighbors and friends too must prosper.  In the modern world, recession and instability find ways to wash upon our shore.  Strong and stable economies abroad make us safer.

We also emerge, I believe, with a greater reservoir of hope – hope about what can be accomplished on the world stage. Of course, this deal is a harbinger of good things for the Irish-American relationship. Ireland may be small. But it is large in the American heart and the American mind. You are among our closest allies, and we rely on you to be a bridge to the EU.

But this deal is also a signifier of our two nations’ relationships with the wider world. There is no large problem in the 21st century that will not require some semblance of multilateralism. Climate change, ending the pandemic, the effort for equality and dignity for all people – all of it will take some form of concerted action, and this deal bodes well for that. Tax, after all, is neither uncontroversial nor uncomplicated. If we can find agreement on this, then what else can we find agreement on?

Let me close by saying this: President Biden is not the only one with an affinity for Irish poets. I developed a great passion for literature in high school. At that time, one of the world’s most notable playwrights was Samuel Beckett, who I understand was born in Foxrock and educated at Trinity. “Let us do something,” Beckett wrote, “Let us do something, while we have the chance! It is not every day that we are needed…  Let us make the most of it, before it is too late! Let us represent worthily for one the foul brood to which a cruel fate consigned us! What do you say?”

For my part, I am beyond grateful to Irish people for saying “yes.” Let us make the most of this moment.

And to conclude, I want to personally thank and applaud the leadership by your Finance Minister and government for making the hard and brave decision to join the United States and 134 other countries in supporting this unprecedented international framework agreement.

Thank you.  Go Raibh maith agat.