"The USA Shield would work by taking advantage of foreign-headquartered businesses' desire to operate in the U.S. Under the rule, companies from countries that don't impose minimum taxes wouldn't be able to take deductions on many payments sent home. Companies would be penalized similarly if they send payments into corporate structures that include low-taxed entities.
Denying such deductions would be the equivalent of taxing that company's income at the U.S. corporate tax rate -- a punitive move designed to pressure countries to change their own tax laws.
In other words, if the global minimum corporate tax is set at 15% and Ireland decides to keep its tax rate at 12.5%, Irish companies operating in the U.S. couldn't fully benefit from the lower rate back home. The U.S. would essentially tax much of their income at 28% under the Biden administration's plan. Separately from the Shield rule, the U.S. would raise the minimum tax it imposes on U.S. companies' Irish profits, and that combination would reduce the benefits of Ireland's low tax rate and could undercut the country's tax base." [1]
1. U.S. News: Rule Puts Teeth in Tax Plan
Rubin, Richard. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]17 June 2021: A.4.
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