How to implement a global tax deal


TO THE G-20: In the end, 136 of the 140 countries negotiating the global tax agreement ended up adhering to the framework unveiled on Friday.

G-20 leaders have yet to approve the deal, which would both establish a 15% global minimum corporate tax and change how and where multinational profits are taxed, as our Bjarke noted. Smith-Meyer and Mark Scott.

But it should be little more than a formality, setting up what could be a few interesting years as leaders around the world try to implement what they just negotiated.

Looking at it from an American perspective: Treasury Secretary Janet Yellen said on ABC’s “This Week” Sunday that she expected Democrats to pass a social spending program this year that includes minimum tax changes existing US necessary to bring it into line with the new global agreement.

A senior Treasury official told reporters on Monday that, in essence, only two updates to the so-called low-tax intangible global income tax, or GILTI – increasing the rate to 15% (or more) and the applying to country – country basis.

As the official noted, the tax package that was adopted by the House Ways and Means Committee and the international draft published by the Senate Finance Committee would tick those boxes.

But there could easily be a lot more twists and turns as Democrats attempt to push through a big tax and spending package with their very narrow majorities in Congress – no votes to spare in the Senate and just a handful in the House. And that raises questions about whether there are enough votes among Democrats to meet those two minimum tax criteria.

Case in point: A small number of House Democrats continue to make noise about proposed changes to the international system that Republicans put in place with their 2017 tax law.

These Democrats are not only concerned that the United States is considering imposing a higher corporate tax burden than what is required under the global agreement negotiated through the Organization for Cooperation and Development. economic development.

They also don’t like the idea that America would introduce these changes earlier than expected in the OECD deal – part of the problem being that Democrats would lose some of the income they seek to earn for. offset their desired social spending if the more robust minimum tax is not put in place for next year.

That’s also the gist of the latest letter, sent last week by Reps Lou Correa (D-Calif.), Henry Cuellar (D-Texas) and Tom O’Halleran (D-Ariz.). All three Democrats urged their leaders “to take a break from moving forward with GILTI and international tax changes right now.”

“We need to find a new path to make sure that we don’t get ahead of the rest of the world in implementing a new GILTI regime, and that we don’t institute new rules of the road, like a regime country by country, ”they said. added.

MORE ABOUT THIS IN A LITTLE, but first thanks for coming to the “I guess most people had a vacation weekend?” weekly tax version. Plus, it would be nice if the rodent problems we encounter here in your country’s capital were as cute as the capybara.

Or roughly the equivalent of how quickly the Biden administration accelerated OECD talks: Today, it’s been three years since Kenyan runner Eliud Kipchoge became the first person to cross the bar of both. hours in a marathon – running 1:59:40 in Vienna. (For what it’s worth, Kenya was one of four countries not to sign the global tax deal.)

E-mail: [email protected], [email protected], [email protected] and [email protected].

You can also reach us on Twitter at @ berniebecker3, @aaronelorenzo, @tobyeckert, @Brian_Faler, @POLITICOPro and @Matin_Tax.

Would you like to receive this newsletter every day of the week? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other information you need to take action on the biggest stories of the day.

THERE IS ALSO ANOTHER PILLAR: In many ways, the most complicated question both for the United States and for anyone trying to put the new tax deal in place is the first pillar – which essentially seeks to reinvent the way the biggest companies are. imposed, reallocating where they actually have business and away from where they have office buildings.

A big problem there: What about the taxes on digital services that France and other countries put in place as they eagerly awaited the OECD deal?

The framework released on Friday essentially puts a freeze on unilateral DSTs going forward and demands that anything already in place be rolled back by the end of 2023.

Making sure those digital taxes are removed has perhaps been the top priority for Silicon Valley and its allies – and the response from those circles on Friday suggests these groups want the OECD deal to take on a more tone. aggressive on that front, although they were delighted. overall with progress.

“We continue to call for the urgent withdrawal of all these unilateral tax measures currently in place, which undermine the international tax system,” said Jason Oxman, chief executive of the Information Technology Industry Council.

The senior Treasury official also noted that the Biden administration would continue to seek potential compromises on how to reduce digital taxes, even as the U.S. trade official continues to threaten to retaliate against countries with universal levies.

One more thing : A senior separate Treasury official declined to explain how Democrats could pass changes to Pillar 1 without changing tax treaties – a very risky proposition requiring a two-thirds majority in the Senate, where Republicans remain quite skeptical of the global tax agreement.

Yellen said there are other methods, although Republicans don’t believe them. The treasury official only said that the implementation of pillar 1 would take some time and that the administration believed it could gain bipartisan support.

ACCUMULATE THESE REVENUES: Here’s a kind of new one – revenues in the United States jumped 18% in the fiscal year ended in late September, even as the economy was still recovering from a pandemic-induced recession.

The federal government’s experience mirrored what has happened in many states – booming incomes because, in many cases, the better-off have weathered the pandemic fairly well.

Revenues have increased across the federal government, but have been particularly healthy in areas primarily paid for by the wealthy, as Pro Tax’s Brian Faler notes.

Business income has now surpassed what it was before Republicans cut corporate tax in 2017, and a separate category including taxes paid due to the realization of capital gains or by middle-tier businesses has also recorded significant gains.

WHAT ABOUT RATIONALIZATION: India is considering simplifying its goods and services tax, Bloomberg reports. The country currently has four rates for its GST – 5%, 12%, 18% and 28% – and the government plans to increase at least some of them as part of a larger overhaul. For example, the two lower rates, which typically cover more household necessities, could be increased by a percentage point, and India could possibly get rid of one of the higher brackets. Finance Minister Nirmala Sitharaman will likely lead meetings in December on potential GST changes, but the government will also need to decide whether to pursue the changes ahead of the vote in major Indian states next year.

READ SMALL CHARACTERS: Gov. Gavin Newsom on Friday signed measures that extend a tax in California on mobile phone bills to help pay for high-speed internet, the Associated Press reported. California is far from alone in collecting this type of tax – some 41 states do so in total. The Golden State tax was due to expire at the end of 2022, before this new extension. The laws Newsom signed will also give state regulators more leeway to change the way tax is collected and allow the state to collect more revenue – up to $ 150 million per year. California is stepping up efforts to bring high-speed Internet to more homes, hoping to have it installed in 98% of homes by next year. But right now, about five out of six rural households in California have high-speed Internet access.

WSJ: “Is the income tax rate for the rich 8% or 23%?” It depends on the math you are using.

NYT: “Biden’s proposal to empower IRS Rattles banks and their customers. “

David Wessel of Brookings: “The rich have found another way to pay less taxes. “

A capybara can stay underwater for up to five minutes at a time.


About Author

Leave A Reply