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261 views • February 6, 2023

GOP Fights Biden Deal That Lets Other Countries Tax US-Based Profits

NTD News
NTD News
The Republican-controlled House of Representatives told the Biden administration in no uncertain terms last week that it won’t approve the deal that Treasury Secretary Janet Yellen negotiated with more than 130 other countries to align U.S. corporate tax laws with those developed by the Organisation for Economic Co-Operation and Development (OECD). In one of the more unusual tactics to bring the United States into compliance with international agreements, the Biden administration signed on to a global tax agreement that includes establishing a minimum corporate tax rate on multinationals of 15 percent, which gives Congress the choice of either approving the deal or watching U.S. companies suffer from foreign tax penalties. While Yellen called the move “a once-in-a-generation accomplishment for economic diplomacy,” the agreement has its critics. “The OECD agreement is a bad deal for American workers and families, and it has no path forward in Congress. The Biden Administration cannot override Congress’s sole tax-writing authority under the Constitution or turn that power over to foreign bureaucrats,” Rep. Jason Smith (R-Mo.), chair of the tax-writing House Ways and Means Committee, stated on Feb. 2. “I think the Biden administration thought they had more political leverage than they did with these rules,” Daniel Bunn, president of the Tax Foundation, a nonprofit analytical group, told The Epoch Times. “I think that was a key mistake that they thought they could get it through Congress with the majority they had, and that was an error on their part.” However, Bunn believes Congress will likely approve at least some parts of the deal. “I think Congress doing nothing is probably a bad option,” he said, because of the risk of foreign tax penalties on U.S. companies that are built into the deal. The new global tax agreement is a complex package that seeks to do away with tax havens and impose minimum taxes in all countries. The plan is divided into two “pillars.” Pillar One allows countries to tax a company’s profits if its products are sold in that country, regardless of where the company itself is based, and would affect an estimated $125 billion in profits. Pillar Two establishes a global minimum tax of 15 percent, which could raise an estimated $150 billion worldwide. Broadly speaking, the plan seeks to increase corporate taxes and redistribute tax income globally, allowing for more tax revenue to go to less developed countries. But Yellen has argued that it could be revenue-neutral for Americans if the United States can collect enough new taxes from foreign companies under the plan. The measures were originally scheduled to be implemented in mid-2023 and would initially apply only to companies earning at least 20 billion euros (about $21.6 billion), although that threshold will likely come down in the future. The implementation now appears to be delayed until 2024 as national governments attempt to work through the details of how it will be implemented and revise existing tax treaties. Some say there is more at stake than corporate tax rates. More About National Sovereignty Than Tax “The OECD tax pillars, especially Pillar Two, are nominally about tax, but they’re much more about sovereignty; that is, who gets to make a country’s tax laws,” Aharon Friedman, a former staffer at the House Ways and Means Committee and the Treasury Department, told The Epoch Times. “The [Biden] administration requested that Congress enact numerous tax increases, and even the Democrats refused to enact most of them, so the Treasury Department went to the OECD and the EU and asked them to enact tax increases on American companies on the income they earned in the United States,” in an attempt to force Congress to follow suit. Joe Hughes, federal policy analyst at the Institute on Taxation and Economic Policy (ITEP), says the purpose of the OECD tax deal is to stop big corporations from arbitraging different countries’ tax laws to avoid paying taxes. “A company like Nike might set up subsidiaries in a tax haven where they register
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