Treasury Secretary Janet Yellen began to put a timeline on when the Biden administration hopes Congress can take up two key portions of a global tax agreement endorsed Saturday by Group of 20 finance ministers in Venice.
Speaking to the press on Sunday, Yellen declined, however, to signal whether she believes part of the plan will require a two-thirds vote in the Senate, an impossible hurdle unless Republicans come round to supporting the deal.
Yellen reiterated that she hoped Congress would approve the portion of the deal that would impose a global minimum tax rate on corporations of at least 15%.
The so-called pillar 2 was “further along” and Yellen was optimistic it will be included in a fast-track budget bill going to Congress later this year that doesn’t require Republican support.
But the component that would redistribute taxation rights on multinational companies based on where they operate was “on a slightly slower track,” she said.
“The details of pillar 1 remain to be negotiated,” she said. “We will work with Congress — maybe will be ready in the spring of 2022 — and try to determine at that point what’s necessary for implementation.”
The accord is on track to be finalized at the G-20 leaders’ summit in Rome in October, and finance ministers have said they foresee global implementation in 2023.
Yellen’s remarks don’t address whether lawmakers will consider the pillar 1 portion to be an international treaty, which would require two-thirds approval in the Senate.
Republican concerns
Two senior Republicans, Senator Mike Crapo of Idaho and Representative Kevin Brady of Texas, last week said they had written to Yellen expressing concerns over the deal, suggesting it may cost jobs and economic growth in the U.S.
The landmark agreement aims to revamp rules that have allowed major companies to save billions by shifting profits to low-tax jurisdictions. A total of 132 countries have backed the two-pillar accord negotiated by the Organisation for Economic Co-operation and Development.
Yellen will head to Brussels after the G-20 meetings Sunday to meet with European Union officials and confront other hurdles facing the tax deal.
Ireland, Hungary and Estonia, each of which has attracted investment using low corporate tax rates, have so far refused to sign up to the minimum tax, creating a potential roadblock because of the need for unanimity on tax issues within the EU.
“We see the tax agreement as being strongly in the interest of all members of the European Union,” Yellen said.
While in Brussels, Yellen said she would seek to explain “why we think it’s in the world’s interest and their interest to be part of the agreement,” referring to the EU holdouts.
Digital tax
EU economic-policy chief Paolo Gentiloni on Saturday also addressed the issue of holdouts.
“We’ll start to work with countries that don’t agree starting Monday,” he said. “Based on contact I’ve had with these countries, the possibility of a deal is there.”
Yellen is scheduled to meet Irish Finance Minister and Eurogroup President Paschal Donohoe and European Commission President Ursula von der Leyen, among others.
Another important item on Yellen’s agenda will be to urge EU officials to abandon or delay a proposed digital levy. The U.S. and EU appear still to disagree over whether that would violate the agreement just endorsed in Venice, which calls for countries to eliminate digital service taxes as part of pillar 1.
Yellen also reiterated the U.S. view that digital taxes discriminate against American firms, and that, under the new deal, countries have promised “to refrain from granting similar measures in the future.”
The Treasury Secretary separately Sunday pushed for a global effort to make the financial system greener. At a conference following the G-20 meeting, Yellen signaled she’ll prod multilateral development banks to rein in their lending for fossil fuels.
— With assistance from William Horobin and Alessandro Speciale
