The global corporate minimum tax deal reached in 2021 is being implemented in the European Union and other countries, while the United States, which negotiated for the agreement in 2021, won’t be part of it immediately, The Wall Street Journal reported.
The agreement of 130 countries to require companies headquartered within their borders to pay a minimum tax rate of at least 15 percent in each of the nations in which they operate was aimed at reducing opportunities for tax avoidance. Treasury Secretary Janet Yellen called for the tax in an April 2021 speech, and the United States played a large part in winning over the countries, but the proposed legislation codifying this into American law could not pass Congress.
It almost certainly will not now.
“The Biden administration cannot override Congress’s sole tax-writing authority under the Constitution or turn that power over to foreign bureaucrats,” said Rep. Jason Smith (R-Mo.), chairman of the Ways and Means Committee. “We will reject all proposals that benefit foreign interests over U.S. workers and families.”
As the European Union begins to implement the law, the Organization for Economic Cooperation and Development (OECD) has given the United States a temporary reprieve until 2025. Under these rules, the more that U.S. companies can count an existing 10.5 percent minimum tax on U.S. companies’ foreign income payments toward their taxes in other countries, the less they will owe to other countries. This tax is known as Global Intangible Low Taxed Income (GILTI).
Other rules clarify how U.S. tax credits for low-income housing and renewable energy interact with the new system.
“At the end of the day, I just don’t think that the U.S. can persuade other countries not to apply a tax regime to the U.S. that the U.S. Treasury negotiated and agreed to,” Chip Harter of PwC LLP and a senior Treasury official during the Trump administration told a tax conference last week. “It is important to start thinking now about what legislation is appropriate to try to address these issues.”