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Yellen told Reuters in an interview on the sidelines of a G7
finance leaders meeting in Italy that China also has been "all
but absent" in the negotiations to finalize "Pillar 1" of the
OECD corporate tax deal reached in principle in 2021 that
involves 140 countries.
"We are actively engaged in this negotiation," to meet an
end-June deadline for the deal, Yellen said. "We're committed to
doing everything we possibly can to make it work."
Earlier on Friday, Italian Finance Minister Giancarlo Giorgetti
told reporters that the Pillar 1 negotiations were set to fail,
citing objections from the U.S., India and China.
The Pillar 1 negotiations are mainly aimed at reallocating the
taxing right on U.S.-based digital giants, allowing about $200
billion of corporate profits to be taxed in the countries where
the companies do business.
A second pillar of the tax deal, the 15% global minimum tax on
corporate profits is separately being implemented by many
countries, but the U.S. Congress has not ratified it.
Yellen said there are two "red line" issues for the U.S. in the
talks, related to transfer pricing and the "Amount B" system for
simplifying the calculation of transfer pricing.
While most countries support the U.S. position on these issues,
"we have a problem with India. India will not engage with us,"
she said.
A collapse of the Pillar 1 negotiations could prompt the return
of digital services taxes in some countries and reignite
potential trade tensions.
Prior to the 2021 initial deal, U.S. trade authorities
threatened 25% tariffs on more than $2 billion worth of imports
from Italy, Austria, Britain, France, Spain and Turkey, from
cosmetics to handbags. These were put on hold after the
countries agreed to suspend their digital taxes while details of
the arrangement were worked out.
Italy wants to negotiate an agreement with Washington that would
stop these tariffs, which are temporarily frozen until June,
while also keeping its levy in place, an Italian official told
Reuters on Friday.
(Reporting by David Lawder; Editing by Alistair Bell)
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