Republicans threaten to derail Biden’s G7-backed plan to fix global tax system | Mondial economy
Joe Biden’s plans to overhaul the international tax system are meeting growing opposition from his Republican opposition who called the proposals “crazy” and threaten to block passage of the landmark deal in the United States.
Treasury Secretary Janet Yellen has led the Biden administration’s attempts to negotiate a global deal on how businesses are taxed, which is part of a larger effort to reshape business taxation in the United States. United.
These efforts were rewarded over the weekend when the G7 group of rich countries backed a global minimum rate of at least 15% and agreed that countries should be able to tax a portion of the profits made by large corporations by depending on the income they generate in that country. , rather than where they are based for tax purposes.
But as Biden travels to London for the G7 summit, the US-led plan faces stiff opposition in Washington, where senior Republicans line up to kill the deal. Former Trump administration economic adviser Kevin Hassett said Yahoo finance Tuesday, that “will not happen”.
With a 100-seat Senate split evenly between Democrats and Republicans, Biden will struggle to push through any changes to international tax treaties with bipartisan support and may be forced to try to pass a bill with votes only. democrats.
Pat Toomey, a Republican senator from Pennsylvania, called the global minimum tax “crazy.”
“Certainly the fact that they had to try to persuade all these other countries to make sure they raise their taxes is an admission of the damage we are doing to our own country,” Toomey said. “They would certainly not have the votes to approve a treaty like this that they are considering.”
Republican Senator John Barrasso of Wyoming, chairman of the Republican Senate Conference, called the plan “anti-competitive, anti-American, and harmful to us as we try to keep growing the economy as we go out.” pandemic ”.
Hassett told Yahoo Finance: “The G7 has no authority over this. In order for the EU to do something, they basically need unanimity, and there is no way to rush that.
“For the United States, there is a big question whether that would pass too, because if you analyze it, what we basically do is give foreign countries a license to hunt to earn income from. American companies they couldn’t get before. “
The deal comes as the Biden administration tries to lower corporate taxes in the United States from 21% to 28%. A hike in global rates is seen as essential to ensure that U.S. businesses don’t choose to move their operations overseas when rates rise.
In return, the G7 countries agreed to end taxes on digital services imposed on U.S. tech companies, which led to the Biden administration threatening to impose retaliatory tariffs on a range of products from the countries. such as UK, Italy, Spain, Turkey and India.
International treaty negotiations are likely to be long and complex. Britain seeks to exclude City of London financial services companies from the global tax overhaul.
Chancellor Rishi Sunak fears Biden’s proposal may prove to be a significant deterrent for banks running many of their operations from London, compounding the impact of Brexit which has shifted financial transactions towards Amsterdam.
It is not clear whether all forms of financial services – ranging from banks to investment funds, insurers and hedge funds – would be excluded in a process yet to be negotiated.
Chris Sanger, head of global government and risk taxation at accounting firm EY, said: “A number of countries assume that there would be an exception for financial services. The question now is how to handle these exceptions without all of the complexities they bring.
Sunak called the tax deal “historic” when G7 finance ministers approved the framework on Saturday, adding it would force “the biggest multinational tech giants to pay their fair share of tax in the UK” .
However, gaps remain in the deal, with key details yet to be worked out between the larger group of G20 countries – including China, India and Brazil – at meetings in Venice next month. The changes will then be negotiated among 139 countries in a process overseen by the Organization for Economic Co-operation and Development, with the aim of reaching a final agreement by October.
Yellen called the weekend deal “historic” and said it “would end the race to the bottom in business taxes and ensure fairness for the middle class and working people in the United States. in the world”.