Republicans oppose Biden deal that would allow other countries to tax US-based profits

Republican lawmakers say OECD global tax policy ‘no way forward in Congress’

In one of the more unusual tactics to force the U.S. to comply with international agreements, the Biden administration is giving Congress the choice of approving the deal or watching U.S. companies suffer foreign tax penalties worldwide. signed a tax treaty.

Congress said this week it will do neither.

On Thursday, the Republican-controlled House of Representatives gave the Biden administration clear words that it would not approve the deal that Treasury Secretary Janet Yellen negotiated with more than 130 countries to align U.S. corporate tax laws with the OECD’s global tax rules. I told you. Yellen called the agreement “a once-in-a-generation achievement in economic diplomacy.”

“The OECD Pact is a bad deal for American workers and families, and there is no way forward in Congress,” said House Ways and Means Committee Chairman Jason Smith (R-Mo.). “The Biden administration cannot override Congress’ sole constitutional power to collect taxes or delegate that power to foreign bureaucrats.”

“I think the Biden administration thought they had more political leverage than these rules,” Daniel Bang, president of the Tax Foundation, a nonprofit analytical group, told the Epoch Times. “It was a big mistake they thought they could pass Congress with a majority, and I think it was their fault.”

However, Ban believes Congress is likely to approve at least part of the deal. “I think Congress doing nothing is probably a bad option,” he said.

new global tax treaty A complex package that aims to eliminate tax havens and impose minimum taxes in all countries. The plan he divided into two “pillars”.

Pillar 1 allows a country to tax a company’s profits if the products are sold in that country, regardless of where the company itself is based. Estimate $125 billion profit. Pillar 2 sets a global minimum tax rate of 15%. This could raise an estimated $150 billion worldwide.

Broadly speaking, the plan aims to increase corporate taxes, redistribute tax revenues globally, and direct more tax revenues to developing countries. However, Yellen argues that if the United States can collect enough new taxes from foreign companies under this plan, it could become revenue neutral for Americans.

These measures will initially be implemented in mid-2023 and will initially apply only to companies with revenues of at least €20bn, although the threshold may be lowered in the future. . Implementation has apparently been postponed until his 2024 as governments look into the details of how it will be implemented and amend existing tax treaties. But some say there is more to the problem than the corporate tax rate.

More About National Sovereignty Than Taxes

“The OECD tax pillar, especially Pillar 2, is nominally about tax, but more about sovereignty: who can make the tax laws of the country,” said House Revenue. Aharon Friedman, a former official of the Commission and Treasury Department, told the Epoch Times. ” [Biden] The administration has asked Congress to enact a number of tax increases, and even the Democrats have refused to enact most of them, so the Treasury Department went to the OECD and the EU to impose tax increases on U.S.-earned income for U.S. businesses. asked to enact. ” In an attempt to force Congress to follow suit.

According to Joe Hughes, federal policy analyst at the Institute for Taxation and Economic Policy (ITEP), the purpose of the OECD tax treaty is to encourage large corporations to arbitrage national tax laws to avoid paying taxes. is to prevent

“Companies like Nike may set up subsidiaries in tax havens that register trademarks for their brands,” Hughes told The Epoch Times. “They profited where the trademark was registered, not where the shoes were manufactured and sold,” he told the IRS.

To close this “loophole”, the OECD agreement forces companies to pay taxes in the countries where they sell their products. Also, if a country refuses to implement her OECD tax rules, especially with respect to her 15% minimum tax rate, other countries can tax corporate profits in that country at higher rates to make up the difference. increase.

“If a country doesn’t implement the agreement, its companies could end up paying the world’s lowest taxes to foreign governments,” Hughes said. “So if Congress takes no action on it and the EU and the UK continue to implement it, the US will lose tax revenue to those countries.”

Congress says it will fight back

Freedman said he expected the House of Representatives to disapprove of the OECD’s plan, saying that if other countries tried to target U.S. companies in retaliation, it would violate existing tax treaties and the U.S. would be forced to follow suit. said it would be dealt with.

“They are not intimidated or bullied by the Treasury Department or other countries,” he said. “Because Congress does not believe in relinquishing sovereignty or powers under the Constitution, it has no intention of enacting Pillar 2 to prevent other nations from attacking or taxing American corporations. We will take all necessary countermeasures to prevent this from happening in violation of our tax treaty.”

joint letter (pdf) appeared to support this view, addressed to Yellen on Dec. 14 by Republican senators and representatives.

“Over the past two years, the Biden administration has made regular commitments in OECD negotiations, but does not have the authority to carry them out,” the letter said. “Despite the Treasury Department’s actions to date, we cannot dictate U.S. tax law or force Congress to act.”

“The implementation of model rules by other countries…one might believe would lead the United States to follow suit, but it would not force the hand of Congress,” the lawmakers wrote. “Nor will Congress sit idly by when U.S. companies and interests are taxed in ways that are contrary to U.S. law and bilateral tax treaties.”

Some people see the OECD Agreement as a Trojan horse. The concern is that more action could be taken if the United States cedes corporate tax authority to foreign entities under this agreement.

“The OECD itself says this is only a first step, and even boasts,” Friedman said. “Their next step is to open a similar project on carbon taxes, and they also want to look at taxing individuals. You can imagine that we can impose a minimum tax on individuals in the middle as well.”

Republicans step up probe into Biden administration’s foreign pacts

Now, the Republican-majority Congress is trying to check the Biden administration’s international pacts that could put the United States at a disadvantage. Earlier this week, the House Oversight Committee called on Biden’s climate change president, John Kerry, to know what he plans to do in high-level climate talks with the Chinese Communist Party (CCP). I issued a letter with strong words.

The letter, issued by Commission Chairman James Comer (R-Ky.), said, “You have used the guise of climate change advocacy to undermine our economic health, circumvent congressional We continue to engage in activities that may threaten our policy.” Noting that Kelly told his Associated Press that he was working with the Chinese Communist Party to “form a group to reduce greenhouse gas emissions,” Comer wrote: increase. But your statements consistently show a disregard for America’s national security and taxpayer money. ”

At the World Economic Forum summit in Davos last month, Kelly said the way to stabilize the climate is “money, money, money, money, money.”

“Trillions of dollars must be unlocked for bankable deals,” Kelly said. “Thinking about saving the planet is like extraterrestrial life. If you said something like that, most people would think of you as left-handed, liberal, good-natured, etc.” You’d think it was just a crazy tree to hug.”