Treasury pushes minimal tax amid Senate opposition
However, it is improbable that the Biden administration would implement its minimum tax proposal before the 2023 OECD deadline.
The Treasury Secretary of the United States, Janet Yellen, stated on Saturday, July 16 that despite strong opposition in the Senate, the United States will pursue every chance to move forward and achieve a global minimum corporation tax deal.
At the G20 conference of finance ministers and central bank governors in Bali, Yellen addressed new worries over the United States' possible refusal to implement the globally negotiated 15 percent minimum tax.
The day before, Senator Joe Manchin, who holds a critical vote in a split Senate, stated that he will not support the Build Back Better (BBB) plan and its demand for a minimal corporate tax rate.
In a radio interview with Virginia Metro News, Manchin stated, "We will not pursue this course of action internationally at this time because other nations would not follow suit and we would put all of our worldwide businesses at risk."
"We cannot do that, therefore we have ruled it out for the time being," he continued.
In 2023, the OECD's global minimum tax regulations were scheduled to become part of national law. While the United Kingdom and other nations are postponing the regulations until 2024, political obstacles in the United States might lead to a deeper collapse in multilateral ties and further delays.
Leonard Wagenaar, international tax partner at EY in London, stated that Manchin's vote bears significant weight since Republicans and Democrats are equally split in the US Senate.
Wagenaar stated, "He may be the most important person in international tax during the past year."
Manchin's resistance prevents the implementation of a 15 percent minimum corporate income tax, a major component of an international accord reached by 137 nations at the OECD to avoid a series of unilateral steps to capture tax revenues from digital economy activities.
He is hesitant about the United States becoming the first nation to adopt the idea when other nations face equally uphill political struggles to establish minimal taxes laws. However, his remarks do not prevent worldwide changes in the long run. White House officials stated that discussions with Congress will continue.
The BBB bill
The ideological debates and opposing legislative agendas within the BBB bill pushed by the Democrats have reduced the measure's size and breadth.
Despite requiring just a simple majority in both the Senate and the House to pass in 2022 under the budget reconciliation procedure of Congress, the plan is unlikely to become law.
Manchin's opposition to legislation proposed by his Democratic Party might reframe global conversations and put pressure on other nations to implement the OECD's minimum taxes requirements first.
However, Yellen maintained that she was optimistic that other nations will move through with the international agreement and that the United States would eventually follow suit.
Yellen stated, "I can assure you that we will continue to pursue every possibility we have to bring this ahead."
As a result of Manchin's statement that he wants to wait until September to examine the plan, the Senate is much more split. However, his words make it less likely that the United States would implement minimal corporation taxes, as it will be difficult for Democrats to pass the law before the midterm elections in November.
"After the US midterm elections in November, the measurements will have altered, and the Democrats' position will likely be worse," said Wagenaar.
Yellen and other Democratic officials are lobbying other nations to move first in the hopes that pressure from lost income will force a future Congress to enact the minimum tax regulations, even if they are delayed.
By fLEXI tEAM