Saturday, September 2, 2023
Wall Street Journal Editorial, An American Warning on the Global Tax:
A delegation from Congress will spend the weekend in Paris and Berlin delivering a message about American opposition to a proposed global minimum corporate tax. We warned the Europeans this would happen.
House Ways and Means Chairman Jason Smith and colleagues plan to meet with officials at the Organization for Economic Cooperation and Development and in the French and German finance ministries to discuss the OECD’s twin corporate tax grabs. The first, known as pillar one, is an excess-profits tax aimed primarily at tech and pharmaceutical companies. Pillar two imposes a minimum effective global tax rate on global companies and lets foreign governments charge “top-up” taxes if a company’s taxes to its home government fall below that level.
Treasury Secretary Janet Yellen signed up for the taxes in 2021 in the hope that global coordination would offer political cover for the Biden Administration’s attempt to raise corporate taxes in the U.S. Those domestic tax hikes couldn’t pass Congress in the form President Biden wanted. But Europeans have pressed ahead with the global tax scheme now that they think they’re free of U.S. opposition that long stymied such international tax grabs.
But Congress was never on board with the OECD plan. Pillar one disproportionately hits U.S. companies, which is a big part of the attraction for governments such as France. Pillar two threatens U.S. competitiveness in many ways, not least by offering more favorable treatment for the type of refundable tax credit European governments favor while punishing the nonrefundable tax credits Congress prefers to offer U.S. companies for expenses such as research and development.
Prior TaxProf Blog coverage: