U.S. Treasury Secretary Janet Yellen is expected to pressure her G20 counterparts to get a global minimum corporate tax rate above the 15 percent of land agreed by 130 countries last week.
U.S. Treasury Secretary Janet Yellen will pressure her 20 (G20) counterparts this week to get a global minimum corporate tax rate above the 15% minimum agreed by 130 countries a week past, but a decision of sorts is not expected until the future stages of negotiations, U.S. Treasury Department officials said Tuesday.
The specific rate and possible exemptions are some of the issues yet to be determined after 130 countries reached a historic agreement last week at a meeting of the Paris-based Organization for Economic Co-operation and Development (OECD).
Countries outlined a global minimum tax and reallocation of tax rights for large, profitable multinational corporations.
The deal is expected to be approved by G20 financial leaders when they meet on Friday and Saturday in Venice, Italy.
Negotiations on the global minimum tax rate, aimed at finalizing the G20 leaders’ summit in October, are tied to the outcome of legislation to raise the U.S. minimum tax rate, a Treasury official said .
The administration of U.S. President Joe Biden has proposed doubling the U.S. minimum tax on intangible income of foreign companies to 21 percent, along with a new “compliance” tax that would deny deductions to companies to pay taxes to countries that do not adopt the new minimum rate.
Officials said several countries were pushing for a rate of more than 15 percent, along with the US.
Yellen has been working with tax drafting committees in the U.S. Congress to include these provisions in budget “conciliation” legislation, to align U.S. tax laws with the new international tax goals.
Democrats in Congress have said they plan to follow this legislation, which is expected to include new investments in social programs and tax increases on American corporations and wealthy Americans, with no Republican votes if necessary. Republicans have vowed to fight any tax increases in the US.
Officials said Treasury legislative proposals to reallocate tax rights have been carefully crafted to appeal to both Democrats and Republicans.
The plans mark a shift from traditional headquarters-based taxation to allowing countries where larger, more profitable U.S. companies sell products and services to tax a portion of those profits. The Treasury could also tax some of the profits from large foreign companies selling in the U.S.
The official said the positive aspects of the deal include securing the loss of tax revenue in the United States and ending taxes on foreign countries ’digital services aimed at U.S. technology giants.
Treasury officials added that Yellen is also making it clear that a new digital imposition that the European Commission plans to propose in the coming weeks to fund the recovery of COVID-19 is incompatible with the European Union’s commitments to the framework agreement. OECD signed on 1 July.
European Commission Executive Vice President Margrethe Vestager told Reuters news agency that the fee would be paid in large part by European companies to pay 750 billion euros ($ 887 billion) in loans for a post-pandemic recovery fund.