Yellen’s global tax plan meets resistance at home, overseas
KOENIGSWINTER, Germany — Treasury Secretary Janet Yellen celebrated a “historic day” last summer when more than 100 nations agreed to a global minimum tax deal, aimed at putting the world’s countries on a more equal footing in attracting and keeping multinational companies. President Joe Biden tweeted that the idea was “diplomacy reshaping our global economy and delivering for our people.”
But last week, as Yellen joined Group of Seven finance ministers for meetings in Germany, she found herself insisting that prospects for moving ahead with the landmark tax plan were merely “not hopeless.”
The plan is running up against new resistance abroad and old divisions at home as fresh global concerns take center stage.
The war in Ukraine, the threat of rising food insecurity, crushing inflation and other urgent matters have stolen finance ministers attention away from putting the plan in place before a 2023 deadline. To add to the pressure, Poland solidified its opposition with a veto at an April European Union finance ministers meeting in Brussels. And Republicans in Congress are balking too.
On Friday, the G-7 finance ministers wrapped up two days of meetings with a joint statement that was most notable for announced pledges of $19.8 billion in economic aid for Ukraine. It included only brief mention of the tax idea, saying the ministers reiterated a “strong political commitment to the timely and effective implementation” of the plan to bring “new rules into effect at global level.”
Broadly speaking, the global minimum tax deal is designed to subject large
multinational firms to a 15% tax rate wherever they operate. The deal also provides for taxing part of the profits of the largest global companies in countries where they do business online but may have no physical presence.
It is supposed to halt an international race to the bottom for corporate taxation that has led multinational businesses to book their profits in countries with low tax rates. This enables them to avoid taxes and encourages countries to slash rates to attract the companies.
The G-7 website calls it “a genuine revolution in international tax law.” French Finance Minister Bruno Le Maire has called it “the most important international tax agreement in a century.”
But Poland is raising new concerns about how the plan would be implemented, and the G-7 meetings did not appear to break the logjam. EU rules require member nation unanimity to change tax-related laws.
Christian Lindner, Germany’s finance minister, said at the end of the G-7 minister meetings that “all the technical concerns have been dispelled, so there can be no technical considerations any more, but highly political ones.”
A spokesperson for
Poland’s Finance Ministry cited concerns about the “lowering of the EU’s competitiveness and placing of additional burden on European businesses” without ensuring that digital giants are adequately taxed. They added that the concerns were heightened “especially when faced with difficulties of the current post-pandemic times.”
Yellen, who has made the tax deal one of her top priorities as Treasury secretary, opened a visit to Europe with a stop in Poland, in part to urge Polish leaders to reconsider their position.
“We’re working to try to address their concerns,” she told reporters last week. “We would love to see Poland come on board. I think it is not hopeless.”
So far, 137 countries representing nearly 95 percent of the world’s gross domestic product have agreed on the plan meant to “ensure that corporations fairly share the burden of financing government,” she said.
But Yellen also faces headwinds at home from congressional Republicans who have displayed little appetite for having the United States hold up its end of the agreement. They say the plan would make the U.S. less competitive in a global economy.