Politics

Global tax deal jeopardized by Manchin’s waiver of minimum corporate levy

“I can’t do that, so we took that off the table,” Manchin said, referring to his closed-door talks with the Senate Majority Leader. chuck schumer (DN.Y.) on the resurrection of their reconciliation bill blocked for a long time.

Although overshadowed by other issues, this legislation is essential to the administration’s efforts to comply with the agreement. He needs Congress to approve the kind of changes to the tax code that more than 100 other countries have agreed to make.

With Republicans lining up against the plain, the administration’s best chance of getting there is to push the plan through Congress in a party-line reconciliation vote.

Failure to act now would not only be embarrassing for the administration. It also raises questions about the company’s future, increasing the risk of other countries pulling out of the deal.

Manchin also told Kercheval he would not support any tax increases as part of a reconciliation plan, at least not this month. He wants to get another reading of inflation from the government first and learn more from the Federal Reserve about its own plans to fight rising prices.

The senator said he would be ready to reconsider in September, after lawmakers recess in August, although the midterm elections are so close that many of his colleagues by then are likely to be even more skittish about it. the idea of ​​raising taxes.

In a statement, the Treasury Department said, “The United States remains committed to finalizing a global minimum tax.”

“It is too important to our economic strength and our competitiveness not to finalize this agreement, and we will continue to examine all possible avenues to achieve this.”

The international agreement is designed to get ahead of multinational companies which for years have avoided taxes by placing their profits in offshore tax havens.

One hundred and forty-one countries have agreed in principle to adopt a minimum tax of 15% on the largest corporations. Each country, including the United States, must now make changes to its individual tax laws to bring them into line with the agreement.

As Manchin may have alluded to, Hungary recently blocked the European Union from implementing the plan — a move Republicans applauded. The Treasury retaliated by promising to cancel a decades-old tax treaty with Hungary.

EU officials say they are considering a workaround that would allow other countries to act despite Hungary’s opposition.

As recently as Thursday, some Democratic lawmakers said they hoped the reconciliation package would include the necessary provisions.

“The very idea of ​​trying to get a comprehensive approach where we don’t have counties competing with each other makes tremendous international sense, and I don’t think it’s going to happen without American leadership,” the senator said. . Mark Warner (D-Va.), member of the finance committee responsible for preparing tax returns.

Manchin’s stance means lawmakers are unlikely to address the issue this year, meaning Republicans would have a lot more say on the issue if they at least regain control of the House this fall.

They have been highly critical of the deal, saying it gives too much to other countries.

While inaction in the United States may cause other countries to abandon the deal, they may also pursue the plan and use it against American companies.

The way the agreement is structured, countries have the right to impose additional taxes on companies that do not pay at least 15%, whether in the domestic market or in foreign markets, than their country of origin adopted the agreement or not.

It’s designed to force reluctant countries to accept the plan – the idea is that if they don’t charge their companies 15%, others will for them.

“Either way the tax is imposed on the company – it’s just a matter of which government collects that revenue,” said Manal Corwin, a former senior treasury official who now works for tax consultancy KPMG. .

And if other countries start using that to tax American companies that don’t pay at least 15%, that could prompt Congress to take action.

“Other countries have indicated their willingness to move forward with or without the United States,” she said.

“You can imagine a situation down the road where Congress sees this as revenue that the United States just leaves on the table for other countries to tax.

Politico

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