U.S. Treasury's Yellen presses Poland on global minimum tax
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[May 21, 2022] By
David Lawder
WARSAW (Reuters) - U.S. Treasury Secretary
Janet Yellen thanked Polish leaders on Monday for hosting millions of
Ukrainian war refugees but pressed them to back the European Union's
plans to implement a 15% global corporate minimum tax.
Poland is the lone holdout in the European Union's implementation plan,
having vetoed a compromise in April to launch the 137-country deal
reached last October aimed at ending a competitive downward spiral in
corporate tax rates.
Poland's new finance minister, Magdalena Rzeczkowska, has sought a
"legally binding" link between the global minimum tax and the other
pillar of tax negotiations - a reallocation of some taxing rights for
large, highly profitable multinationals to "market countries" where
their services and products are sold.
For some countries participating in the Organisation for Economic
Co-operation and Development's negotiations, that so-called Pillar 1
plan is the more desired global tax change, allowing them to collect
revenue from large U.S. technology giants such as Google owner Alphabet,
Facebook owner Meta, Amazon.com and Apple.
But the reallocation pillar was not part of the October deal and is not
fully developed. That more complex plan requires changes to
international tax treaties, and Rzeczkowska has expressed concerns that
if it fails, the global minimum tax would put undue burdens on European
businesses.
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French Finance Minister Bruno Le Maire, current chair of EU finance
ministers, has expressed scepticism over those arguments amid legal
disputes between Poland and the EU.
EXTRA REVENUE
Yellen met Polish Prime Minister Mateusz Morawiecki and was due later to
meet Rzeczkowska and central bank governor Adam Glapinski.
In a statement issued by the U.S. Treasury after the Morawiecki meeting,
Yellen underscored the need for Poland to move forward on the tax deal
because it will "raise crucial revenues to benefit the citizens of both
Poland and the U.S."
The EU Tax Observatory has estimated https://www.taxobservatory.eu/wp-content/uploads/2021/10/Note-2-Revenue-Effects-of-the-Global-Minimum-Tax-October-2021.pdf
that the tax would bring Poland 2 billion euros ($2.08 billion) in
annual revenue, which could help defray the high costs of hosting
Ukrainian refugees.
"Importantly, these revenues are going to be paid by large multinational
corporations, not Polish individuals or small businesses," said a source
familiar with the tax discussions, adding that it would allow Poland to
compete on the basis of its skilled and low-cost workforce and economic
fundamentals. The source was not authorised to speak publicly about the
issue and declined to be identified.
Yellen "expressed her gratitude at the generosity Poland has shown in
welcoming refugees" from Ukraine and discussed Europe's energy situation
and screening of investments into Poland to protect national security,
the Treasury said.
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![](../images/051622PIX/_busin45.jpg)
Treasury Secretary Janet Yellen testifies during the Senate Banking,
Housing, and Urban Affairs Committee hearing titled “The Financial
Stability Oversight Council Annual Report to Congress,” in Dirksen
Senate Office Building in Washington, D.C.,U.S., May 10, 2022. Tom
Williams/Pool via REUTERS
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A statement from the prime minister's office made no mention of the tax deal but
focused on coordinating international efforts to put pressure on Russia to end
its war in Ukraine and reducing dependence on Russian energy.
"Poland will continue to call for further tightening of EU sanctions, especially
in the energy, finance, transport and services sectors. In order to successfully
stop the war machine, we must reduce Russia's economic and military potential as
soon as possible."
U.S. UNCERTAINTY
Yellen also needed to reassure Polish officials about growing uncertainties over
U.S. implementation of the global minimum tax, said Manal Corwin, head of KPMG's
Washington national tax practice and a former U.S. Treasury official.
The U.S. Congress needs to approve changes to the current 10.5% U.S. global
overseas minimum tax known as "GILTI," raising the rate to 15% and converting it
to a country-by-country system.
The changes were initially included in U.S. President Joe Biden's sweeping
social and climate spending bill, which stalled last year after objections from
centrist Senate Democrats.
Prospects for a slimmed-down spending package with the tax changes look
increasingly difficult as mid-term congressional elections approach and as
lawmakers voice concerns about more spending amid high inflation.
But Corwin said lack of U.S. implementation will likely not halt the other 136
countries from proceeding, especially if Poland can be brought on board with EU
implementation.
"If the EU directive is successful, I think the rest of the world is going to
move with or without the U.S. changes," Corwin said. "So my sense is it's not as
concerning to countries as it might have been before."
Tax experts say that EU implementation would ultimately put pressure on the
United States to adopt the changes because some taxes paid by U.S.
multinationals under the system would flow to foreign jurisdictions rather than
to the U.S. Treasury.
($1 = 0.9593 euros)
(Reporting by David Lawder; Editing by Aurora Ellis and Edmund Klamann)
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