Two of the most influential Democratic lawmakers on tax policy have backed a new bid from the Biden government in OECD talks on global corporate taxes, even though Republicans on Capitol Hill have warned that the changes could hurt U.S. multinational corporations.
The US Treasury this week proposed a comprehensive multilateral agreement that will include a new global minimum corporate tax rate. Under the plan, national governments could tax the global taxes of about 100 of the largest and most profitable multinationals, including America’s own major technology groups, based on their sales in those countries.
The Washington Open is intended to build momentum at the OECD for an agreement by the middle of the year. But once an agreement is reached, it will require congressional approval, where Democrats have slim majorities and Republicans face strong opposition to Biden’s agenda.
Ron Wyden, the Democratic chairman of the Senate Finance Committee, said in a statement to the Financial Times that the Biden administration proposal ‘could be the basis for a global agreement’ on corporate levies. Wyden is an important voice in the debate, as his panel has jurisdiction over taxation and trade.
‘I have long had two objectives for the OECD process: to end discriminatory taxation on digital services, and to establish a global tax system that treats American companies fairly. “Treasury’s new proposal has the potential to achieve both of these goals,” he said. “It is important that this proposal supports the necessary reforms to U.S. tax law, to ensure that our multinational corporations are encouraged to invest in the United States and pay their fair share.”
Legislators in both parties are already scrambling for Biden’s local plan to raise corporate taxes to pay for its $ 2 ton infrastructure spending package, but according to sources familiar with the plan, any OECD agreement would move on a separate track.
Richard Neal, Democratic chairman of the powerful Committee on Taxpayers’ Homes and Resources, joined Wyden in supporting Biden’s OECD plan. A spokesman for Neal said: “The chairperson supports a multilateral solution and believes that the Treasury Department has put forward an important proposal that has the potential to promote a conversation that has been trapped for far too long.”
But well-known political battle lines are emerging on Capitol Hill over the OECD offer, with Republicans doubting the revelation of the Biden government, meaning it will not be easy to obtain dual support for any deal.
“We are concerned that the OECD changes could directly reduce US tax revenues and also open the door to other countries’ continued attacks on US companies and our local tax base,” a group of Republicans said in a report to the House Committee. writing. a letter on Thursday to Janet Yellen, the treasury secretary, requesting an information session on the OECD plan.
Republican lawmakers, led by Kevin Brady of Texas, also objected to the U.S. proposal for a global minimum rate of 21 percent on companies, suggesting the level was too high. “As a result, American workers and businesses will have a serious competitive advantage over their foreign counterparts,” they wrote.
Many U.S. businesses have exploded Biden’s local tax plan, which includes a 21 percent to 28 percent increase in the income tax rate, but generally support the OECD’s multilateral negotiations, which complicate the political comparison.
While some large U.S. companies may be squeezed under a new global regime with higher taxes, they will have the certainty to avoid the patchwork quilt of one-sided taxation on their sales that has increased in recent years.
‘American companies seem receptive to these talks, even if they mobilize against them [Biden’s domestic corporate tax plan], ”Said Ben Koltun, a policy analyst at Beacon Policy Advisors in Washington. ‘If the [OECD agreement] happens to the infrastructure pushed by Democrats, then I think political tensions could possibly cool over tax policy and it has a greater chance of getting Republican support. ”
Technical companies, represented by the Information Technology Industry Council, a lobbying group that includes Apple, Amazon, Google and Facebook, said they were “encouraged” that governments try to reach an agreement.
Megan Funkhouser, ITI’s director of tax and trade policy, said her group was looking forward to ‘better understanding and evaluating what the US proposal entails’ and encouraging’ negotiators to continue promoting their work on political agreement achieving further fragmentation of our global enlightenment. tax system ”.
The Coalition for a Prosperous America, which represents unions and local manufacturers, said the new OECD tax proposal would level the playing field for local producers in the US and price the shift to taxation based on the location of sales. “Our membership usually does all their business here in the U.S., giving them less opportunity to limit tax strategies and avoid U.S. taxes,” said Jeff Ferry, the group’s chief economist.