Yellen Sees U.S. Companies Pushing to Back Global Tax Deal
Treasury Secretary Janet Yellen said U.S. companies are likely to provide crucial support in pushing lawmakers to back a global overhaul of corporate taxation, helping overcome Republican opposition that may slow or stop ratification of an accord endorsed by Group of 20 nations over the weekend.
“To the extent that the Republican side is going to be looking to business and trying to protect business interests, my guess is that businesses are going to be saying to members of Congress, please approve this,” Yellen said Tuesday in an interview in Brussels, as she wrapped up a week in Europe.
At the G-20 meeting of finance ministers and central bankers in Venice, attended by Yellen, nations put their stamp of approval on a preliminary pact that would revamp how countries tax multinational firms. The deal was also backed by 132 nations in talks led by the Organization for Economic Cooperation and Development. It faces challenges back in Washington, however, where the administration is counting on Congress to pass legislation to bring the U.S. fully in line with the agreement.
Yellen had made clear in Venice she hoped the minimum tax portion, also known as Pillar Two, would be included in a fast-track budget bill going to Congress later this year that doesn’t require Republican support.
But she emphasized in the interview that many multinational business leaders have come out in support of the deal because it could provides them with more certainty on tax rates and rules.
It’s unclear whether a two-thirds Senate vote will be needed on the part of the plan to divide up profit taxes on the biggest firms, making it much more difficult to pass. That part is known as Pillar One.
Yellen held out hope that Republicans would come on board, if necessary.
“A year or so from now if Pillar One comes along and needs some congressional action, I would not start with the assumption that it would be impossible to get that on a bipartisan basis,” she said in the interview.
The agreement would set a minimum tax rate of at least 15% in order to prevent companies from relocating to low-tax havens, and establish a system for sharing some of the profit taxes imposed on the very largest international companies based on where they operate and not where they’re headquartered.
Yellen has repeatedly emphasized the deal would help countries capture more tax revenue from big companies, and the Biden administration is counting on the global tax revamp to help support a $4 trillion, 10-year economic agenda in the U.S.
Leaders are hoping to finalize the deal in October at the G-20 summit in Rome. Getting to the finish line will require clearing a few significant hurdles, which Yellen sought to address on her trip.
She met with Irish Finance Minister Paschal Donohoe on Monday. The session didn’t produce any public results, but Yellen said her meetings with European partners were productive and went well. Ireland is one of the three European nations that have declined so far to sign on to the global tax accord.
“This is a real shift on how the world is going to cooperate to make sure capital income bears its fair share of paying for common needs,” she said. “I honestly feel this is an historic shift that we’ve agreed to.”
The Business Roundtable, a group representing chief executives of large U.S. companies, previously said in April that “any U.S. minimum tax should be aligned with” an agreed-upon global level. The global talks have backed a U.S. proposal for a rate of at least 15%, though the Biden administration is seeking a 21% rate for U.S. companies.
Grace Perez-Navarro, a top tax official at the OECD, made the case for why businesses should like this deal Tuesday at an Urban-Brookings Tax Policy Center virtual event.
“Tax certainty is a key part of this deal,” she said. Multinationals subject to the framework “will benefit from new dispute prevention and resolution mechanisms, which will avoid double taxation.”
A separate, unconnected problem also awaits Yellen when she arrives back in Washington on Tuesday evening, as the U.S. government once again creeps closer to the so-called debt ceiling.
If Congress doesn’t act before then, the current suspension of the debt limit is set to expire on July 31. It’s unclear how long the Treasury can cover government expenses, which ultimately could push the U.S. into default on maturing debt payments. Congress so far lacks a clear plan to raise it.
Yellen said she intends to write to Congress as the end of July approaches to advise lawmakers on how long Treasury could hold out, but didn’t want to speak ahead of that.
The Treasury Department declined to put on record Yellen's comments on other topics.
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