US Treasury Secretary Janet Yellen assured Finance Minister Paschal Donohoe in June that the Biden administration would be able to push through Congress key measures of the global corporate tax agreement. OECD, reported the New York Times. However, new doubts have arisen after Joe Manchin, a Democratic US senator from West Virginia, said last week that he would block the passage of key climate and tax legislation by Mr Biden, including elements of OECD agreement, by the Senate.
Mr. Donohoe met with Ms. Yellen in early June in Washington in her capacity as chairman of the Eurogroup, the committee of finance ministers from eurozone countries. The Department of Finance has confirmed that the corporate tax agreement is an item on the agenda.
It’s a matter that Mr. Donohoe and Ms. Yellen discussed on several occasions, both before and after the Republic opted in to the deal. And Mr. Donohoe has referred in interviews to Ms. Yellen’s confidence that the deal will pass Congress.
The 50/50 split between Democrats and Republicans in the Senate means Senator Manchin has been one of the few Democrats able to hold up progress on Mr Biden’s key tax and climate package. This includes legislation to implement a 15% minimum tax rate on U.S. corporate overseas income, in line with the new global minimum rate that is a central part of the OECD agreement.
Time is running out now before the Congressional midterm elections in November to push through the deal. Senator Manchin expressed deep concerns about the international tax pact, for which he had previously indicated his support, saying it would disadvantage American companies.
“I said we’re not going to go that route overseas right now because the rest of the countries won’t follow, and we’ll put all of our international businesses at risk, which hurts the US economy.” , said Senator Manchin. a West Virginia radio station on Friday. “So we took that off the table.”
Her turnaround is a blow to Ms Yellen, who has spent months onboarding more than 130 countries. It’s also a defeat for Mr. Biden and the Democratic leaders in the Senate, who have pushed to raise tax rates on many multinational corporations in hopes of leading the world in an effort to stop corporations from shifting their jobs and income to minimize their tax bills.
The OECD tax deal has two main elements: the minimum tax rate of 15% for large companies and new measures to change where tech companies pay part of their tax.
Uncertainty about what will happen in the US has delayed implementation of the deal around the world, including in the EU where Hungary is resisting a 15% rate deal.
Talks on how to implement the other part of the deal, which would change where businesses are taxed, are not expected to conclude until the middle of next year. It’s also unclear how the Biden administration would secure that element of the deal through Congress.
Despite Senator Manchin’s comments, the US Treasury Department said it was not abandoning the deal.
“The United States remains committed to finalizing a global minimum tax,” Treasury spokesman Michael Kikukawa said. “It is too important to our economic strength and our competitiveness not to finalize this agreement and we will continue to examine all possible avenues to do so.”
Jared Bernstein, a member of Biden’s council of economic advisers, told reporters at the White House on Monday that the president “remains fully committed” to participating in a global tax deal. “Any rumor of his disappearance is extremely premature,” Bernstein said.
The whole project has been on shaky ground in recent months amid continued opposition in the EU, delays over technical fine print and concerns over actual US membership. Nevertheless, it remains possible that the EU and other countries will continue to push ahead with the deal, leaving the US as an awkward exception to a deal it relaunched last year. .
If the EU moves ahead of the US, US companies may have to make top-up payments in EU countries to make up the difference between the 15% minimum and the current US rate of 10.5% applied to income abroad. This, in turn, would put pressure on US lawmakers to act.