Washington DC–Republicans on the US Senate Finance Committee, led by non-commissioned member Mike Crapo (R-Idaho), have written to Treasury Secretary Janet Yellen renewing requests for information regarding international tax negotiations. To date, the Treasury has been unwilling or unable to fully engage with Congress to provide details of the negotiations, which will have a significant impact on American workers, businesses and incomes.
Senators are concerned about how the negotiations could negatively impact the competitiveness of the United States; the United States’ commitment to increase its overall minimum tax before any other country; and suggestions that the Treasury could implement the deal without the advice and consent of the Senate, bypassing the treaty process.
âThe administration’s rush to reach political agreement, linked to its domestic spending plans and the search for revenue, came at the expense of in-depth analysis and meaningful engagement with Congress and the government. business world, and may ultimately put American businesses at risk. . . . Given the potential of this agreement to undermine the competitiveness of the United States, we continue to be concerned about the lack of detail underlying the approach proposed under the first pillar and its lack of basis in tax principles. discernible.
âWhat is even more troubling is the Treasury’s continued insistence that the United States once again act first by dramatically increasing the United States global minimum tax. . . . Since the second pillar does not require other countries to adopt a global minimum tax, we are not convinced that our largest foreign competitors, like China, will adopt and apply a global minimum tax on the same terms or within the timeframe. agreed at the OECD.
âFinally, suggestions that the United States could fully implement the first pillar without the advice and consent of two-thirds of the Senate through the treaty process are very problematic. . . . [A]Any suggestion that the first pillar can be implemented without the ratification of a treaty constitutes a radical departure from previous precedents and calls into question the binding nature of such an agreement, thus threatening tax security even as many countries. our companies, and this administration, claim to seek under Pillar One.
Senators end the letter with a detailed list of questions regarding the proposals, reiterating that any opportunity for a bipartisan outcome will require greater transparency and a commitment from the Treasury.
All Republican members of the finance committee signed the letter:
- Mike Crapo (R-Idaho, Ranking Member)
- Chuck Grassley (R-Iowa)
- John Cornyn (R-Texas)
- John Thune (R-South Dakota)
- Richard Burr (R-North Carolina)
- Rob Portman (R-Ohio)
- Pat Toomey (R-Pennsylvania)
- Tim Scott (R-South Carolina)
- Bill Cassidy (R-Louisiana)
- James Lankford (R-Oklahoma)
- Steve Daines (R-Montana)
- Todd Young (R-Indiana)
- Ben Sasse (R-Nebraska)
- John Barrasso (R-Wyoming)
The full text of the letter can be read here or below.
Dear Secretary Yellen,
We remain focused on ensuring that the agreement reached within the Organization for Economic Co-operation and Development (OECD) / G20 on international taxation keeps American businesses and workers competitive globally. Because this administration has not provided us with the details necessary to evaluate the agreement, we renew our request for information.
The United States’ engagement in the OECD negotiations has always received broad bipartisan support given the key objective of eliminating discriminatory taxes on digital services (DST). Rather than prioritizing this common goal, the focus of this administration has shifted to its national agenda to increase taxes on American businesses, including through a higher global minimum tax. The administration’s rush to reach political agreement, linked to its domestic spending plans and the search for revenue, came at the expense of deep analysis and meaningful engagement with Congress and the world. business, and can ultimately put American businesses at risk.
Given the potential of this agreement to undermine the competitiveness of the United States, we continue to be concerned about the lack of detail underlying the approach proposed under the first pillar and its lack of basis in tax principles. discernible. Although you said that the first pillar would be âlargely income neutralâ for the United States, you declined to provide us with an analysis to support your claim. You also undermined that claim by acknowledging that open design features can “have a significant impact on US businesses and the US tax position relative to other countries.”
We are also concerned that the timetable for the implementation of the first pillar agreed by this administration is not realistic. The administration’s recent deals allow existing DSTs to remain in place, suspend all options for U.S. retaliation, and require implementation by December 31, 2023 in order for DSTs to be removed. Given the number of open questions remaining and the need for all countries to reach consensus, implementation by 2023 is likely unachievable. These deals appear to eliminate any US leverage, while attempting to manipulate Congress into acting – potentially to the detriment of US businesses and revenues – in order to obtain DST relief.
The Treasury’s continued insistence that the United States once again act first by dramatically increasing the U.S. global minimum tax. The United States already acted first when the Global Low Tax Intangible Income Minimum Tax (GILTI) was enacted four years ago. Yet the United States remains the only country to impose a global minimum tax on its businesses. Since the second pillar does not require other countries to adopt a global minimum tax, we are not convinced that our largest foreign competitors, like China, will adopt and apply a global minimum tax on the same terms or within the timeframe. agreed at the OECD.
Finally, suggestions that the United States could fully implement the first pillar without the advice and consent of two-thirds of the Senate through the treaty process are very problematic. Beyond constitutional concerns, any suggestion of implementation through an agreement between Congress and the executive at this point is grossly inappropriate: this administration has chosen not to engage with Congress to establish a legislative procedure defining the OECD negotiating objectives or providing for a detailed monitoring and consultation process. The Administration cannot now assert that it has the authority to enter into such an agreement. Overall, any suggestion that the first pillar can be implemented without the ratification of a treaty is a radical departure from previous precedents and calls into question the binding nature of such an agreement, thus threatening certainty. very fiscal that many of our businesses, and this administration, claim to seek under the first pillar.
Any opportunity for a bipartisan outcome will require greater transparency and engagement. We ask that you provide prompt answers to the following questions regarding these proposals:
- Please provide your estimate of the number of US companies that would fall under the scope of the first pillar.
- While we understand that there are open design issues, Treasury has clearly performed an analysis and identified a range of possible outcomes. Please provide point estimates for the following and describe the major design issues upon which these estimates depend:
- The amount of profit that would be reallocated between the United States and foreign countries, including a breakdown of estimated amounts by country.
- The net impact on Pillar 1 revenue in the United States.
- The Joint Committee on Taxation (JCT) has long been involved in OECD negotiations at the request of the two congressional tax drafting committees. If you do not wish to share this information directly with our members, do you agree to provide this information to JCT so that they can provide independent and confidential analysis?
- Please provide a proposed plan for the implementation of the first pillar, including:
- The approach proposed by the Treasury for implementation, including actions provided for by treaty, national legislation and changes to our competent authority agreements.
- The timeline proposed by the Treasury for the United States to implement the first pillar.
- If the Treasury’s position is that treaty action will not be necessary to implement the first pillar, by what means and under what authority will the United States enter into a multilateral convention? Please provide a detailed analysis of how each of the permanent establishment provisions of each of the U.S. bilateral tax treaties will be amended by means other than the formal treaty approval process.
- If the first pillar is not implemented by December 31, 2023, will US companies have recourse for DST collected by that date? Will other countries be free to adopt DST at that time?
- What are the OECD’s plans for public consultation with stakeholders, including Congress and the US business community, before design and implementation plans are finalized? What efforts is the Treasury Department making to ensure meaningful public consultation?
- What commitments, if any, has China made regarding the timeline for implementing a 15% global minimum tax? Have any of the other 134 countries that have joined the accord made a commitment to you regarding implementation?
We will continue to engage in good faith to assess the effects of this agreement on American workers, businesses and incomes. However, the current position of this administration of blocking our requests for relevant and material information made this determination impossible.
We appreciate your attention to these issues and look forward to your prompt response to our questions.