Read for 5 minutes (Reuters) – WASHINGTON (Reuters) – Janet Yellen’s first trip to continental Europe as Treasury Secretary bolstered G20 political support for a worldwide corporate tax agreement and provided European Union officials with an excuse to postpone a contentious digital tax proposal. PHOTO FROM THE FILE: On Capitol Hill in Washington, DC, U.S., on June 23, 2021, US Treasury Secretary Janet Yellen testifies before the Senate Appropriations Subcommittee on Financial Services regarding the FY22 Treasury budget request. REUTERS/File Photo: Shawn Thew/Pool Following a G20 conference in Italy over the weekend, Yellen met with EU officials in Brussels on Monday and Tuesday. She now faces a fight in the US Congress over the Biden administration’s tax-hike plans, which include a 15 percent-plus global corporate minimum levy negotiated by 132 countries. Yellen said she wants to intensify her outreach to members of Congress from both parties as she works with heads of the House and Senate tax writing committees to draft legislation under budget “reconciliation” rules to adopt the OECD’s “Pillar 2” corporate minimum tax. Democrats are generally expected to try to utilize new regulations to push through President Joe Biden’s plans to raise taxes on corporations and the rich to help fund infrastructure, child care, and other social goals without Republican backing. Several prominent Republican senators have blasted the OECD agreement as a “surrender” of the US income base, vowing to fight any rollback of the 2017 tax cuts. “I disagree with the Republicans, but I believe it is necessary for me to convey to them the logic of this agreement and why I believe it is in the best interests of the United States,” Yellen said. “I’m still hopeful that they’ll be able to back aspects of it. I believe it is my responsibility to work with people on both sides of the aisle.” Treasury officials said they’re hoping for bipartisan support for the more complicated “Pillar 1” reallocation of taxing rights for large, profitable corporations, which will necessitate a new international agreement to allow taxation in nations where they sell goods and services. On Sunday, Yellen stated that this portion of the agreement will not be ready for consideration by Congress until at least the spring of 2022. SPRINT FOR NEGOTIATION In Venice, Italy, Yellen joined other G20 finance officials to endorse the OECD tax pact, which included signatories agreeing to forego national digital services taxes in favor of the new taxing powers. The decision kicks off 15 weeks of frantic negotiations in the hopes of reaching a detailed deal by the G20 leaders summit in Rome on Oct. 28-29. The actual global minimum rate, the percentage of multinational profits above a 10% margin that market countries can tax, the size threshold for those companies, subsidy carve-outs, and potential exclusions for certain sectors, such as financial services or mining, are the main issues still to be decided. Yellen’s first in-person talks with top EU officials, according to Rebecca Christie, a non-resident fellow at the Brussels-based Bruegel economic think tank, helped heal transatlantic relations frayed by four years of “America First” policies under former US President Donald Trump. “Now it’s up to Yellen to persuade Congress to support the tax package. The United States’ willingness to commit to a global minimum tax was critical to resuming the OECD negotiations “Christie said. “Similarly, U.S. implementation will be critical in persuading other signatories to keep their commitments.” GIFTAS ON ARRIVAL On the same day that Yellen met with European Commission President Ursula von der Leyen for the first time, the EU’s executive body announced that a plan for a new digital levy would be postponed, removing a potential stumbling block in the discussions. Last year, when global tax negotiations stalled and several nations moved forward with their own digital services taxes, that plan to help pay COVID-19 relief was devised. Because countries had agreed not to levy new digital taxes, Yellen said it was best for the EU to wait until the specifics of the tax pact were finalized before reworking its plans. Yellen is advocating for a higher worldwide corporate minimum tax rate than 15%, and she wants Congress to increase the US abroad minimum tax rate to 21%. “Obviously, various countries have different viewpoints on this,” Yellen told Reuters. “The goal over the next several months will be to see where we can establish common ground.” “But look, finding common ground on which everyone agrees on at least 15% is a significant problem.” Yellen stated that she believes the EU’s tax skeptics. “Find a means to get to yes,” Ireland, Estonia, and Hungary want to say. David Lawder contributed reporting, and Simon Cameron-Moore edited the piece./n
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