U.S. Republicans vow to oppose Yellen's G7 tax deal, casting doubt on
its future
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[June 08, 2021]
By David Morgan and David Lawder
WASHINGTON (Reuters) - Several top U.S.
Senate Republicans on Monday rejected Treasury Secretary Janet Yellen's
G7 deal to impose a global minimum corporate tax and allow more
countries to tax big multinational firms, raising questions about the
U.S. ability to implement a broader global agreement.
The opposition from Republicans may push President Joe Biden to attempt
to use budget procedures to pass the initiatives with only Democratic
votes.
It left lawyers and tax experts in Washington wondering whether it could
get done without crafting a new international treaty, which requires
approval by a two-thirds majority in the evenly split 100-member Senate.
"It's wrong for the United States," Republican Senator John Barrasso
said of the tax deal struck on Saturday by finance ministers from the G7
wealthy democracies.
"I think it's going to be anti-competitive, anti-U.S., harmful for us as
we try to continue to grow the economy and certainly at a time when
we're coming out of a pandemic," Barrasso, who chairs the Senate
Republican Conference, told reporters at the U.S. Capitol.
In the landmark agreement, G7 finance ministers agreed to pursue a
global minimum tax rate of at least 15% and to allow market countries to
tax up to 20% of the excess profits - above a 10% margin - of around 100
large, high-profit companies.
Yellen said the "significant, unprecedented commitment" would end what
she called a race to the bottom on global taxation.
In exchange, G7 countries agreed to end digital services taxes, but the
timing for that is dependent on the new rules being implemented.
The deal could pave the way for broader buy-in by G20 countries and some
140 economies participating in international negotiations over how to
tax large technology firms such as Alphabet Inc's Google, Facebook Inc,
Amazon.com Inc and Apple Inc. All are expected to be included in the
new, broader mechanism, which is targeted for a final international
agreement in October.
Republican Senator Pat Toomey said the deal would drain tax revenues
away from the U.S. Treasury to other countries, adding that he hoped
some Democrats would be unwilling "to subject the American economy to
this kind of misery."
"There will be no Republican support for this, and they'll have to do
this on a party-line vote. That needs to fail," Toomey told Fox Business
Network.
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U.S. Treasury Secretary Janet Yellen speaks during a news
conference, after attending the G7 finance ministers meeting, at
Winfield House in London, Britain June 5, 2021. Justin Tallis/Pool
via REUTERS
TREATY OR NOT
Daniel Bunn, an international tax expert at the Tax Foundation, a
right-leaning think tank in Washington, said he believed that
establishing new taxing rights on 100 multinational firms would
require a new tax treaty.
The U.S. Constitution gives the president the right to make
international treaties "if two-thirds of Senators present concur."
U.S. participation in some international treaties has been hampered
by domestic partisan divides, in which a president approves the
deals but they are not ratified by Congress.
Manal Corwin, head of KPMG's Washington National Tax Practice and a
former U.S. Treasury official, said Yellen's G7 deal could be done
through legislation that overrides existing bilateral tax treaties -
using a simple majority as part of budget reconciliation procedures.
With Vice President Kamala Harris as the tiebreaking vote, Democrats
control 51 votes in the Senate, but cannot afford to lose any
Democratic votes.
Senator Ron Wyden, asked how much can be done with the budget
reconciliation procedures and what would require a super-majority
vote, said: "Those are all questions that lawyers are now immersed
in."
Wyden, who chairs the tax-writing Senate Finance Committee, told
reporters that deterring the use of tax-haven countries and ensuring
minimum levels of corporate taxation were "in the long-term interest
of American workers."
"There’s a lot of heavy lifting to do here," Wyden added. "It’s
going to take a number of months, that’s for sure."
Toomey, who sits on the Finance Committee, said he believed
Democrats could push through the tax changes with only Democratic
votes, without a treaty, but added that would require the United
States to "surrender" and agree not to oppose changes imposed by
other countries.
(Reporting by David Lawder and David Morgan in Washington;
Additional reporting by Jarrett Renshaw; Editing by Heather Timmons
and Peter Cooney)
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