– The global minimum tax threatens to fail due to US opposition
130 countries have signed up to the new global corporate tax regime. But in the US Congress, the chances are slim due to the concentrated opposition of the right.
The United States needs Ireland. This is because only if all EU member states – as well as tax haven Ireland – agree, can the EU join the most ambitious global tax reform of decades.
After a recent meeting between U.S. Treasury Secretary Janet Yellen And their Irish representative, Pascal Donoho, is beautiful: both sides want to create the details of the deal creatively. Yellen said Ireland would not lose its status as a low-tax country if the minimum rate for companies was raised to 12.5 to 15 percent. Because the U.S. minimum rate is 21 percent – or even 28 percent if President Biden is able to implement his tax plans.
But that is precisely a major obstacle. The balance of power in the US Congress is so tight that Biden faces a tough group of Republican nemesis, despite the support of more than 130 countries.
The US Congress decides
You can delay the discussion of the deal until next year with the unreasonable hope of dominating Congress with a double majority after the midterm elections in the fall of 2022. This leads to a stalemate: Congress, under the leadership of the European Union, is closely monitoring whether the world approves a minimum corporate tax of 15 percent and the equitable distribution of tax revenue.
Conversely, Congress may closely monitor how quickly tax islands such as Ireland raise their tax rates and instead repeal unilateral taxes on US technology companies such as Amazon or Apple. Chip Carter, the Trump administration’s chief tax negotiator, says this puts great pressure on the United States to win. “The rest of the world is well aware that the Fiden government cannot force Congress (to make a tax deal).”
“If other countries do not get the tax negotiated negotiated, they will soon lose their appetite for this agreement.”
Robert Strock, Obama executive tax negotiator
Robert Stroke, a tax negotiator for the Obama administration, also expressed doubts in the Wall Street Journal: “The role of Congress is decisive. If other countries do not get the tax negotiated negotiated, they will soon lose their appetite for this agreement. ”
Pay taxes where turnover is generated
In doing so, Biden should try to break the dual opposition of Republicans and the country’s leading business associations. According to them, the tax agreement is a competitive evil: this agreement weakens the position of American companies abroad and increases inflation; This week Yellen foolishly dismissed it.
The first part of the agreement aims to prevent multinational corporations from evading their tax obligations in their own country by transferring profits to lower tax countries. In the future, profits should be taxed wherever companies sell. Due to their global presence, pharmaceutical and technical groups are particularly vulnerable. For example, Ireland has become the tax haven for 24 of the 25 largest pharmaceutical companies. Amazon, Google, Apple and other technology companies are also evading US taxes through clever financial maneuvers.
The second part of the agreement sets the minimum corporate tax at 15 percent, which is always aimed at stopping the race for lower taxes. Biden would have preferred a higher rate, but the agreement would only apply if both regions were recognized by all countries. This is where the domestic political siege in Congress comes into effect.
In the first part, Biden could be stabbed without Republican approval, but for the second part he needs 60 votes in the Senate, but with only 50 Democrats votes, which is also uncertain. The matter is further complicated by the fact that Biden wants to fund his social projects by redistributing taxes with two trillion dollars.
“There are many conflicting interests for congressional approval.”
Kevin Brady, Republican MP
This combination of tax contracts, higher U.S. taxes and new spending is so complex that it can only succeed with a lot of luck. “There are many contradictions in approving Congress,” said a leading Republican MP. Kevin Brady warned.