Do it in london
With the help of Aaron Lorenzo
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WELL, THEY DID IT: Treasury Secretary Janet Yellen traveled to London and got fairly full approval of the US plan for a global minimum tax from the rest of the G-7 finance ministers.
CFOs also haven’t offered vague platitudes in favor of the U.S. executive, as noted by Pro Tax’s Aaron Lorenzo – behind both the 15% rate that the Treasury proposed a few weeks ago. and applying this tax to a country. base by country.
There is no doubt that the prospects for a global tax deal have only improved since President Joe Biden took office. But even Yellen herself acknowledged that there are boxes that still need to be checked before the multi-year negotiations underway at the Organization for Economic Co-operation and Development officially bear fruit.
“We think we have a strong momentum towards a global deal,” Yellen told reporters in London, before adding: “There are a number of countries that have concerns. Ireland and China are. examples. This is not a finished deal. There are still details to work out. “
And since the secretary mentioned Ireland: One of the big questions about moving to a minimum tax of at least 15% has been what will entice countries that currently have lower corporate tax rates – think also of Cyprus and Hungary, among others – to join.
It has long been assumed that the big countries would try to coax the smaller ones into supporting the deal, should it materialize. And Yellen laid out at least one way they plan to do it – a “pay under tax rule” in the framework that would pressure countries to comply even if they really don’t want to. not.
“When you understand all the details, you will see that it does not require absolute agreement on all levels. He has a way to get hold of the recalcitrant, ”Yellen said.
And what about China? Convincing Beijing could be an even more difficult task, and there are a lot of people watching the process who don’t expect China to adhere to a deal.
“Let’s face it, it’s going to be a tough fight,” said Bruno Le Maire, France’s finance minister, via the Wall Street Journal. “I am optimistic that we will win it because the G-7 gives us extremely powerful political momentum.”
MORE ABOUT THIS IN A LITTLE, but welcome to the first edition of “Thank God the pool was open this weekend” of Weekly Tax.
Well, it’s taking a turn: today, 42 years have passed since Chuck Berry gave a concert for President Jimmy Carter at the White House – just days before the rock and roll pioneer pleaded guilty to charges of tax evasion, for which he ultimately served four months. in prison.
It would be a “Johnny B. Goode” moment to send us your best advice and comments.
E-mail: [email protected], [email protected], [email protected] and [email protected].
HEY, DON’T FORGET CONGRESS: Here’s the thing about a global tax deal – a country is going to have to be the first to actually vote on it.
Experts have described it as almost a full-scale chicken game – other countries might want to see the US go first, both on minimum tax and related changes being discussed. that deal with how and where to tax the profits of large multinationals.
Meanwhile, the same may be true for lawmakers in Washington – even Democrats, who might be reluctant to move forward with the tax changes the Biden administration wants without knowing for sure that others. countries will stick to their end of the deal.
The two leading congressional Democratic tax writers – House Ways and Means President Richard Neal of Massachusetts and Senate Finance President Ron Wyden of Oregon – hailed what they called the “historic consensus” reached in London.
Still, you could be forgiven for thinking that Neal and Wyden’s statement wasn’t brimming with excitement. “We look forward to reviewing the details of today’s deal and applaud the leadership of the Biden administration in its efforts to level the international playing field and support American workers,” they said.
Another potential problem is that Republicans could very easily be required to pass some of the changes that were discussed in London – and certainly would be if tax treaty changes were necessary.
Congressional Republicans are aligned against the tax increases the White House has called for in infrastructure negotiations, which include increasing the existing international minimum tax in the United States, the intangible global income levy at low tax, or GILTI.
So there is certainly a risk that GOP lawmakers will not rush to support something that could be seen to help these efforts.
“We continue to warn against any developments that could hurt American businesses and ultimately hurt American workers and jobs at a critical time in our country’s economic recovery,” said Representative Kevin Brady. (R-Texas) and Senator Mike. Crapo (R-Idaho), the two main GOP tax draftsmen in Congress, who also noted that no other country has minimum tax like the United States and that other countries have not moved away unilateral digital taxes.
LOOKING FORWARD: Negotiators will see if they can maintain the momentum for the global tax deal next month, when finance ministers from the G-20 – a group that includes China – meet in Venice. The goal remains for a final agreement to be ready for a next G-20 meeting in October.
As for the reaction from the outside? Yellen said she expects the deal to force digital powers – which have long been at the center of the OECD process for other G-7 members – to pay more. The powers of Silicon Valley looked good with it over the weekend, given that the alternative might be to have to navigate a slew of unilateral digital taxes.
The G-7 deal has also received poor criticism from the left, although it is not clear what pressure negotiators will feel from below. A minimum tax of 15% “would do little to end the race to the bottom of corporate taxes and curb the widespread use of tax havens,” said Gabriela Bucher, Executive Director of Oxfam International .
CUT CUT CUT: Pakistan is seeking to reduce taxes on imports of raw materials, which Prime Minister Imran Khan’s team says will boost domestic manufacturing. Abdul Razzak Dawood, Khan’s trade advisor, told Bloomberg that tariffs would be reduced by 3-10% on items needed by various sectors, such as pharmaceutical and food processing. Pakistan wants to improve its economic growth, which is expected to be just under 4% this year, and Dawood said the reduction in import taxes would put the country more in line with some of its competitors. The Pakistani government is expected to present a new budget later this week, and the reduction in import duties will certainly come at a cost: these taxes currently account for over 40% of the country’s revenue.
ALL ABOUT THE NEWSLETTER: What’s the best way to push politics right in Colorado these days? This is likely the measure of the ballot, as the Denver Post reports – which is why there is currently a bipartisan effort in the legislature to seek to prevent a property tax reduction proposal from going this far. Lawmakers fear the potential 9 percent cut will be particularly difficult for rural governments to absorb, so they are rushing to pass a bill that would essentially cut the teeth out of the ballot box. The proposal – mostly backed by Democrats, but with some support from the GOP – would also temporarily reduce some property taxes for a few years. The $ 200 million relief would go to apartments, single-family homes, farms and renewable energy properties.
Reuters: “Ireland is convinced that the G7 tax deal will not hurt investment by multinationals.”
CNN: “Why Wall Street Fears a Global Tax Deal. “
Remember to think about the tax implications if you plan to work elsewhere this summer.
Chuck Berry was the first person to be inducted into the Rock & Roll Hall of Fame in 1986.