Treasury Secretary Janet Yellen is expected to push her G20 colleagues to a global minimum tax rate of over 15 percent, which 130 countries agreed on last week.
US Treasury Secretary Janet Yellen is set to push the group of 20 (G20) colleagues this week for a global minimum corporate tax rate above the 15 percent floor agreed by 130 countries last week, but a tax decision will not be made until in Future stages of negotiations expected, US Treasury officials announced on Tuesday.
The specific rate and possible exceptions are among the issues to be determined after 130 countries reached historic agreement at a meeting of the Organization for Economic Co-operation and Development (OECD) in Paris last week.
The countries outlined a global minimum tax and redistribution of taxation rights for large, highly profitable multinational corporations.
The deal is widely expected to be approved by G20 finance leaders when they meet in Venice, Italy on Friday and Saturday.
Negotiations on the global minimum tax rate, due to be concluded by the G20 summit in October, are tied to the outcome of legislation to raise the US minimum tax rate, an official from the Treasury Department said.
The administration of US President Joe Biden has proposed doubling the US minimum tax on intangible income of foreign companies to 21 percent, along with a new accompanying “execution tax” that would deny companies deductions for tax payments to countries that meet the new global minimum rate .
Officials said several countries along with the US are pushing for a rate above 15 percent.
Yellen has worked with US Congress tax committees to incorporate such provisions into budget reconciliation legislation to align US tax laws with new international tax objectives.
The Democrats in Congress have announced they will pursue such legislation, which is expected to include new investments in welfare programs and tax hikes for US businesses and wealthy Americans, possibly with no Republican votes. Republicans have vowed to fight US tax hikes.
Officials said the Treasury Department’s bill to redistribute tax rights was carefully crafted to appeal to both Democrats and Republicans.
The plans mark a move away from traditional head office taxation to allow countries where the largest and most profitable US companies sell products and services to tax some of those profits. The Treasury Department could also tax a portion of the profits of large foreign firms selling to the US.
The official said the positive effects of the deal will be to ensure that no US tax revenue is lost and that overseas digital services taxes are abolished for US tech giants.
The tax officials added that Yellen is also making it clear that a potential new digital levy that the European Commission is expected to propose in the coming weeks to fund recovery from COVID-19 is inconsistent with the European Union’s commitments of the OECD Framework Agreement signed on July 1st.
European Commission Vice-President Margrethe Vestager told Reuters that the levy will largely be paid by European companies to repay € 750 billion ($ 887 billion) in loans for a post-pandemic recovery fund.