World Leaders Hit Rome to Toast a Tax Deal That’s Far From Done

(Bloomberg) -- Global heads of government including President Joe Biden will endorse a historic revamping of international corporate tax rules when they gather in Rome this weekend, though they have a long way to go to make the plan a reality.

Multi-country negotiations over important aspects of the plan remain unfinished. And the details that won’t emerge for many months may determine whether the U.S. Congress approves or rejects the deal, a decision that could make or break it internationally.

As they prepared to head for Rome, Treasury officials reiterated their optimism that the deal would ultimately attract bipartisan support among U.S. lawmakers. The agreement would end the flight of multinationals to low-tax havens, help provide needed tax revenue for governments and deliver a new level of certainty for companies operating across tax jurisdictions, the officials said in a briefing call with reporters Tuesday.

The pact, backed by 136 countries worldwide, would set a global minimum tax of 15% and reallocate some of the taxes imposed on the largest multinational firms based on where they generate revenue, instead of where they book profits.

But U.S. officials also acknowledged that work has only just begun on designing the formula for reallocating tax rights.

That formula will help determine the impact of the global tax deal on U.S. tax revenues. And should the reallocation have a net negative impact, it will be tougher for the Biden administration to secure congressional approval.

If Congress doesn’t get on board, that could, in turn, sink the broader international  deal. Several countries, including Ireland and other European Union members, have conditioned their support for the minimum tax on the U.S. following through on the tax reallocation. 

U.S. Treasury Secretary Janet Yellen will travel to Dublin immediately after attending the Rome summit, in part to express U.S. appreciation for its participation in the deal. Ireland’s assent was crucial since tax rule changes in the EU required by the new pact must be agreed to unanimously by EU member countries.

Yellen will meet with Ireland’s Finance Minister Paschal Donohoe on Nov. 1 and attend an event organized by the American Chamber of Commerce in Ireland. 

More than 900 U.S firms have a presence in Ireland, employing 180,000 directly, and another 140,000 indirectly, according to Treasury officials. Many of them were drawn to Ireland by its low corporate tax rates.

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