Biden Sells G-7 on Global Tax, But US Congress Obstacles | WIVT
President Joe Biden may have persuaded some of the world’s largest economies to raise corporate taxes, but the U.S. Congress could be a lot harder to sell.
White House press secretary Jen Psaki said on Friday that leaders of the Group of Seven – which also includes the UK, France, Canada, Germany, Italy and Japan – were agree with Biden on imposing a global minimum tax of at least 15% on large corporations. . G-7 leaders, attending a three-day summit in England, said their finance ministers approved the global minimum tax earlier this month.
“America is rallying the world so that large multinational corporations pay their fair share so that we can invest in our middle class at home,” Jake Sullivan, the president’s national security adviser, said on Twitter on Friday.
A minimum tax is supposed to put an end to a race to the bottom in corporate taxes that has led multinational companies to register their profits in countries with low tax rates. This allows them to avoid taxes and encourages countries to reduce rates. The minimum rate would make it harder for businesses to avoid taxes and could potentially supplant a digital services tax that many European countries impose on U.S. tech companies that pay low rates.
Officials in the Biden administration believe the use of overseas tax havens has discouraged companies from investing in the country, to the detriment of the middle class. The president hopes that approval from the G-7 can serve as a springboard for securing membership from the largest group of 20 nations.
The agreement is not a definitive agreement, as the terms would have to be agreed upon by the countries of the Organization for Economic Co-operation and Development and implemented by each of them. The president needs other countries to support a global minimum tax to ensure that his own plans for an improved tax in the United States do not hurt American businesses.
âIt has the potential to stop the race to the bottom,â said Thornton Matheson, senior researcher at the Tax Policy Center. “It would be a huge change in the way things are done with corporate taxes over the past three decades.”
The idea of ââan improved global minimum tax is also an integral part of Biden’s national agenda, but it is meeting resistance in Congress.
The president has proposed using a global minimum tax to help finance his vast infrastructure plan. Its budget proposal estimates it could raise nearly $ 534 billion over 10 years, but Republicans say tax code changes would make the United States less competitive in a global economy.
Treasury Secretary Janet Yellen defined the deal as a matter of fundamental fairness after the finance ministers’ meeting.
âWe must have stable tax systems that generate sufficient income to invest in essential public goods and respond to crises and ensure that all citizens and businesses fairly share the burden of financing government,â she said.
Texas Representative Kevin Brady, top Republican on the House Ways and Means Committee, said GOP lawmakers would fight “tooth and nail” against the tax. Republicans see lower taxes as an incentive for businesses to invest and hire, giving little weight to Biden’s argument that improved infrastructure and better-trained workers would help increase growth.
âIt’s an economic capitulation,â Brady said Friday. “President Biden succeeded in doing the impossible – he did better to be a foreign company and a foreign worker than an American company and an American worker.”
Republican Senate Leader Mitch McConnell of Kentucky has repeatedly said his party will oppose any measure reversing the 2017 tax cuts promulgated by President Donald Trump.
The 2017 overhaul created a new way to tax foreign corporate profits with what is known as ‘low-tax intangible global income’. Congressional Democrats have said the framework encourages companies to invest in foreign countries rather than in their own country.
Biden proposed to increase that rate to 21% among other changes to the code. The administration sees the 15% of the G-7 as a floor rather than a ceiling for rates. But the G-7 plan differs from what Biden proposed and details remain to be finalized, with tax experts noting that there appear to be discrepancies in the rates and treatment of assets such as buildings and equipment.
Democrats want to dig into the fine print of any deal before giving full approval to what comes out of the G-7, which means Biden will have to continue selling to American voters and their representatives.
Senate Finance Committee Chairman Ron Wyden of Oregon supports the general idea of ââa global minimum tax. But Wyden said in a statement with House Ways and Means Committee chairman Richard Neal of Massachusetts that they needed to dig into the deal to see if Americans would really benefit.
“We are optimistic about the possibility of reaching a strong multilateral agreement to harmonize our international tax rules, end the race to the bottom and end taxes on digital services,” said the two Democratic lawmakers. “We look forward to working with the administration and assessing the outcome of these negotiations for American workers, businesses and taxpayers.”