Explainer: What is a global minimum tax?

[U.S. Treasury Secretary Janet Yellen, saying:] "We are working with G20 nations to agree to a global minimum corporate tax rate."

Money has long been lost to tax shelters and havens - but that could be set to change.

"Another consequence of an interconnected world has been a 30-year race to the bottom on corporate tax rates.”

The U.S. Treasury Secretary Janet Yellen said she is working with G20 countries to create a global corporate minimum tax.

“Together, we can use a global minimum tax to make sure the global economy thrives based on a more level playing field."

Multinational companies often shift profits to low-tax countries regardless of where their sales are made.

It’s why the likes of Apple are headquartered in Ireland.

It allows companies to avoid paying higher tax than in their home countries and means governments often have to lower their taxes to lure foreign investment.

With the new rules, the Biden administration is hoping to reduce tax base erosion without putting American firms at a financial disadvantage.

“President Biden's proposals announced last week call for bold domestic action, including to raise the U.S. minimum tax rate and renewed international engagement, recognizing that it's important to work with other countries to end the pressures of tax competition and corporate tax base erosion.”

Under the proposal, governments could still set their own local corporate tax rates.

But if companies pay lower rates abroad, their home governments could ‘top up’ their taxes, bringing them in line with the global minimum rate.

Negotiations have been happening for years among 140 countries at the Paris-based Organization for Economic Cooperation and Development.

The OECD said governments are in broad agreement with the principle but the thorniest issue is said to be the rate itself - which is yet to be established.

Even just within the European Union, corporate tax rates vary among its 27 members, from 9% in Hungary to 32% in France.

The EU’s attempts to unify what companies are taxed on have even been stalled since 2011.

Taxation is a jealously guarded prerogative of national parliaments and often forms a key part of a country’s economic model.

Biden’s administration has proposed a global minimum of 21%.

That’s far above previous discussions - which circled around 12.5%, a level that happens to match Ireland’s.

The Irish economy has boomed in recent years, fueled by the influx of billions of dollars of investment from foreign multinationals.

That means Dublin is unlikely to accept a higher rate without a fight.