US political battle lines are forming over Biden’s global tax plan

Two of the most influential Democratic tax policy lawmakers have backed a new offer from the Biden administration during OECD negotiations on global business taxation, even as Republicans on Capitol Hill have warned the changes could harm American multinationals.

The US Treasury this week offers a far-reaching multilateral agreement that would include a new minimum global corporate tax rate. As part of the plan, national governments could tax the global profits of about 100 of the largest and most profitable multinationals, including major US tech groups, based on their sales in those countries.

The opening in Washington aims to give the OECD momentum for a deal by the middle of the year. But once a deal is struck, it would require approval from Congress, where Democrats hold a slim majority and Republicans strongly oppose much of Biden’s agenda.

In a statement to the Financial Times, Ron Wyden, the Democratic chairman of the Senate finance committee, said the Biden administration’s proposal “could be the basis for a global deal” on business taxes. Wyden is a crucial voice in the debate since his panel has jurisdiction over taxes and trade.

“I have long had two goals for the OECD process: to end discriminatory taxes on digital services and to adopt a global tax system that treats US businesses fairly. The new Treasury proposal has the potential to achieve both of these goals, ”he said. “Above all, this proposal could support the reforms needed to US tax laws, ensuring that our multinational corporations have an incentive to invest in the United States and pay their fair share. “

Lawmakers on both sides are already arguing over Biden’s national plan to raise corporate taxes to pay his $ 2 billion infrastructure spending package, but Congress approval of any OECD deal is expected to evolve on a separate track, according to people familiar with the plan.

Richard Neal, Democratic chairman of the powerful Ways and Means Committee of the Tax Drafting House, joined Wyden in supporting Biden’s OECD plan. A spokesperson for Neal said: “The President supports a multilateral solution and believes the Treasury Department has come up with an important proposal that has the potential to advance a conversation that has been stalled for too long.”

But familiar political battle lines emerge on Capitol Hill over the OECD’s offer, with Republicans expressing doubts about opening up the Biden administration, meaning it won’t be easy to gain support bipartisan for an agreement.

“We are concerned that the changes to the OECD will directly reduce US tax revenues and also leave the door open to continued attacks by other countries on US businesses and our national tax base,” a group of Republicans wrote on the House Ways and Means Committee in a press release. letter Thursday to Janet Yellen, Secretary of the Treasury, requesting a briefing on the OECD plan.

Republican lawmakers, led by Kevin Brady of Texas, also opposed the US proposal for a minimum 21% global corporate tax rate, suggesting the level was too high. “This result would place American workers and businesses in a serious competitive position with their foreign peers,” they wrote.

Much of American business has lambasted Biden’s national tax plan, which includes an increase in the corporate tax rate from 21% to 28%, but has generally supported multilateral negotiations at the OECD, complicating the political equation .

While some large U.S. companies may face higher taxes under a new global regime, they will be sure to avoid the patchwork of unilateral sales taxes that has proliferated in recent years.

“American companies seem receptive to these discussions even if they are mobilizing against [Biden’s domestic corporate tax plan]Said Ben Koltun, policy analyst at Beacon Policy Advisors in Washington. “If the [OECD agreement] happens after the infrastructure push by the Democrats, so I think political tensions may be able to subside on fiscal policy and this has a better chance of gaining Republican support.

Tech companies represented by the Information Technology Industry Council, a lobby group whose members include Apple, Amazon, Google and Facebook, said they were “encouraged” that governments were trying to come to an agreement.

Megan Funkhouser, director of tax and trade policy at ITI, said her group was eager to “better understand and assess what the US proposal entails” and urged “negotiators to continue to push forward the work in with a view to reaching a political agreement that alleviates the fragmentation of our tax system “.

The Coalition for a Prosperous America, which represents unions and domestic manufacturers, said the OECD’s new tax proposal would level the playing field for domestic U.S. producers and welcomed the shift to location-based taxation. sales. “In general, our members do all their business here in the United States, which gives them less opportunity to engage in tax minimization strategies and avoid American taxes,” said Jeff Ferry, Chief Economist of the group.

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