KOENIGSWINTER, Germany (AP) – Treasury Secretary Janet Yellen marked a “historic day” last summer when more than 100 countries agreed to a global tax deal, aimed at putting the world’s nations on an equal footing in attracting and keeping multinational corporations. President Joe Biden tweeted that the idea was “Diplomacy is reshaping our global economy and delivering to our people.”
But this week, when Yellen joined G7 finance ministers at meetings in Germany, she found herself insisting that the prospects for moving forward with the historic tax plan were “not hopeless”.
The plan collides with new resistance abroad and old divisions at home (e) With new global concerns taking center stage.
The ongoing war in Ukraine, the growing threat of food insecurity, a crushing of inflation, and other urgency have taken the finance ministers’ attention away from putting the plan into action before the 2023 deadline. To add to the pressure, Poland bolstered its opposition by vetoing a meeting of union finance ministers. European in April in Brussels. And Republicans in Congress refuse, too.
The finance ministers of the Group of Seven major industrialized nations on Friday concluded their two-day meeting with a joint statement that highlighted the pledges of $19.8 billion in economic aid to Ukraine. It included only a brief reference to the idea of the tax, saying that ministers reiterated a “strong political commitment to the timely and effective implementation” of the plan to implement “the new rules globally”.
In general, the global minimum tax deal It is designed to subject large multinational corporations to a 15% tax rate wherever they operate. The deal also provides for taxing a portion of the profits of the world’s largest companies in countries where they do business online but may not have a physical presence.
It is supposed to stop the international race to the bottom for corporate taxation that has driven multinational corporations to cash in on countries with low tax rates. This enables them to avoid taxes and encourages states to lower prices to attract businesses.
The G7 website describes it as a “real revolution in international tax law”. French Finance Minister Bruno Le Maire called it “the most important international tax treaty in a century”.
But Poland is raising new concerns about how the plan will be implemented, and the G7 meetings do not seem to break the deadlock. EU rules require the unanimity of member states to change the laws on taxation.
“All technical concerns have been dispelled, so there can be no more technical considerations, but … very political ones,” said Christian Lindner, German Finance Minister, at the end of the G7 ministers’ meetings.
Wydział Prasowy, a spokesman for Poland’s Ministry of Finance, cited concerns about “lowering the competitiveness of the EU and putting an additional burden on European companies” without ensuring adequate taxation for digital giants. He added that fears have increased, “especially when facing difficulties in post-pandemic times.”
Yellen, that held the tax deal One of her top priorities as Treasury Secretary, this week’s visit to Europe opened with a layover in Poland, in part to urge Polish leaders to reconsider their position.
“We are working to try to address their concerns,” she told reporters Thursday. “We would like to see Poland join the ship. I think it is not hopeless.”
So far, she said, 137 countries representing nearly 95 percent of global gross domestic product have agreed to the plan, which aims to “ensure that businesses equitably share the burden of government financing.”
But Yellen is also facing headwinds at home from Republicans in Congress who have shown little desire to get the United States to hold on to the agreement’s end. They say the plan will make the US less competitive in the global economy.
Senator Mike Krabow of Idaho, a senior Republican on the Senate Finance Committee, and Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, signaled Poland’s opposition in a joint statement last month.
“If the EU has really hit the roadblocks, no one should expect countries like China to implement this deal any time soon,” they said.
The deal may be unlucky because it was born in politically troubled times, said C. Eugene Styrel, fellow at the Urban Institute and co-founder of the Urban-Brookings Tax Policy Center in Washington.
“What makes anything like that difficult these days is that the two parties are so divided,” he said. “That’s what really threatens this legislation more than the idea – which I think would traditionally have had support, at least some support from both sides of the aisle.”
There is also a crush of other global concerns that demand attention.
“Governments have a certain amount of bandwidth — current events should push some of these other things down the list,” says David Feldman, professor of economics at the College of William and Mary in Virginia.
Mark Goldwyn, senior policy director at the Special Committee on Responsible Federal Budget, said the general idea of the tax plan “should not be punitive” but “to increase revenue for all states.”
“We also hope that it will prevent countries from lowering their taxes compared to other countries,” he said.
According to the Congressional Research Service, since the mid-1960s, US corporate tax payments have fallen Relative to the size of the economy – to roughly 1 percent of GDP in 2020 from 3.9 percent in 1965.