Janet Yellen, the US Treasury Secretary, said on Sunday that when a process which is allowing an enlarging number of countries to extract large amounts of taxes, multinational companies with high profits may not likely be affirmative on the review of legislators until 2022.
Yellen expressed in a press conference after the G20 Financial Leaders’ Meeting in Venice, Italy, the Organization for Economic Cooperation and Development (OECD) process of redistributing taxation rights is better than determining the new global minimum corporate tax rate “slightly slow” at 15%. The minimum corporate tax rate is part of a tax agreement reached by 132 countries.
All the finance ministers of G20, along with the central bank governors, supported the agreement over the weekend, but there are still questions about whether the administration of US President Biden can persuade the deeply divided Congress to approve these changes.
Yellen’s remarks indicate that the process of implementing the OECD tax agreement is divided into two steps. The first is the lowest corporate tax in the world. She expressed the hope that the minimum tax rate clause called the “second pillar” can be included in this year’s budget coordination bill, and Congress can pass the bill with a simple majority, which may not require Republican support.
The “first pillar” of the agreement will end the unilateral taxation of digital services in exchange for a new mechanism that will enable large and profitable technology giants such as Google and Facebook to sell products and services to the country and not just pay taxes to the country where the headquarters or intellectual property is located.
U.S. Treasury officials said that this would require a multilateral taxation agreement, and negotiations will take time. Yellen said that the cause of effect of the first pillar is going to be slower. She was asked if she needed a two-thirds majority in the U.S. Senate, which is usually required by international treaties.
It is still unclear how the 2022 time frame will affect the removal of the unilateral digital service tax. When asked how he views the European Commission’s plan to propose a new digital tax to fund the epidemic relief, Yellen made it clear that EU countries have agreed to withdraw such taxes. As a report stated by the Financial Times on Sunday, the European Commission may postpone its digital tax plan until the fall, hoping to increase the possibility of reaching a global corporate tax reform agreement. Quoting a few people who are concerned with the matter, Financial Times highlighted that the European Commission was under pressure from U.S. Treasury Secretary Yellen to shelve the digital tax proposal. The Financial Times stated that the European Commission was originally scheduled to propose the motion this week, but it has postponed the date to July 20.