Yellen’s global tax plan faces resistance at home and abroad

KOENGIGSWINTER, Germany (AP) — Finance Minister Janet Yellen celebrated a “historic day” last summer when more than 100 countries agreed to a deal on the world’s lowest tax Countries around the world are on a more equal footing in attracting and retaining multinational corporations. President Joe Biden tweeted that the idea is “diplomacy to reshape our global economy and serve our people.”

But when Yellen met with G7 finance ministers in Germany this week, she found herself insisting that the prospect of moving forward with a landmark tax plan was “not hopeless.”

The plan is meeting new resistance abroad and old divisions at home e as the new global focus.

The ongoing war in Ukraine, the growing threat of food insecurity, severe inflation and other urgent problems have distracted finance ministers from implementing the plan by the 2023 deadline. To add to the pressure, Poland cemented its opposition with a veto at a meeting of EU finance ministers in Brussels in April. Republicans in Congress are also hesitant.

Finance ministers from the Group of Seven nations ended their two-day meeting with a joint statement on Friday, most notably announcing a pledge of $19.8 billion in economic aid to Ukraine. It only briefly mentioned the idea of ​​taxation, saying ministers had reiterated a “firm political commitment to the timely and effective implementation of the plan” for “the new rules to take effect globally”.

Broadly speaking, global minimum tax treaties Designed to allow large multinational corporations to pay a 15% tax wherever they operate. The agreement also provides for a tax on some of the profits of the largest global companies in countries that do business online but may not have a physical presence.

It should stop an international corporate tax race that has led multinationals to book profits in low-tax countries. This allows them to avoid taxes and encourages countries to lower their tax rates to attract companies.

The G-7 website calls it a “true revolution in international tax law.” French Finance Minister Bruno Le Maire called it “the most important international tax treaty in a century”.

But Poland has raised new concerns about how the plan will be implemented, and the G7 meeting did not appear to have broken the deadlock. EU rules require member states to unanimously agree to amend tax-related laws.

German Finance Minister Christian Lindner said at the end of the G7 ministers meeting that “all technical issues have been eliminated, so technical issues can no longer be considered, but … highly politicized issues.”

Polish finance ministry spokesman Wydział Prasowy expressed concern about “reducing the EU’s competitiveness and placing additional burdens on European businesses”, but did not secure a tax on digital giants. Concerns have intensified “especially in the face of the difficulties of the current post-pandemic period,” he added.

Yellen strikes tax deal One of her priorities as finance minister is to start a trip to Europe this week with a stop in Poland, in part to urge Polish leaders to reconsider their position.

“We are working to address their concerns,” she told reporters on Thursday. “We want to see Poland join. I don’t think it’s hopeless.”

So far, 137 countries, which account for nearly 95 percent of the world’s gross domestic product, have agreed on plans to “ensure a fair share of the government financing burden on businesses,” she said.

But Yellen also faces resistance at home from Republicans in Congress who have no interest in keeping the U.S. sticking to the end of the deal. They said the plan would make the United States less competitive in the global economy.

Sen. Mike Crapo of Idaho, the top Republican on the Senate Finance Committee, and Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, in a joint statement last month Both pointed to Poland’s objections.

“If the EU has already hit a snag, no one should expect a country like China to implement the deal anytime soon,” they said.

C. Eugene Steuerle, a fellow at the Urban Institute and co-founder of the Brookings Center for Tax Policy in Washington City, said the deal may have been unlucky when it was born in a time of political turmoil.

“What makes things like this difficult these days is that the two parties are so divided,” he said. “That’s what’s really threatening this legislation, not the idea – I think it’s going to get support traditionally, at least some support from both sides of the aisle.”

There are other global issues that require attention.

“Government has a certain bandwidth — current events have to push some other things further afield,” said David Feldman, an economics professor at the College of William and Mary in Virginia.

Marc Goldwein, senior policy director at the Private Committee for a Responsible Federal Budget, said the general idea of ​​the tax plan was “not punitive” but “revenue-enhancing for all countries”.

“It is also expected to prevent countries from cutting taxes relative to other countries,” he said.

According to the Congressional Research Service, since the mid-1960s, corporate taxes in the United States have Refused Relative to the size of the economy – from 3.9% in 1965 to about 1% of GDP in 2020.

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