Washington DC–Republicans on the US Senate Finance Committee, led by Senior Member Mike Crabow (R-Idaho), have written to Treasury Secretary Janet Yellen renewing their requests for information on international tax negotiations. So far, the Treasury has been unwilling or unable to fully engage with Congress to provide details about the negotiations, which would have a significant impact on American workers, businesses and revenue.
Senators have raised concerns about how the negotiations might negatively affect the competitiveness of the United States. US commitment to raise global minimum taxes before any other country; and suggestions that the Treasury could implement the agreement without the advice and approval of the Senate, bypassing the treaty process.
“The administration’s rush to reach a political agreement, tied to domestic spending plans and the pursuit of revenue, has come at the expense of comprehensive analysis and meaningful engagement with Congress and the business community, and may ultimately jeopardize American companies. . . . We remain concerned about the lack of detail behind the proposed approach under Pillar I and its lack of foundation in any identifiable tax principles.
Also of concern is the Treasury’s continued insistence that the US again move first by significantly increasing the US global minimum tax. . . . Since the second pillar does not require other countries to adopt a global minimum tax, we are not confident that our largest foreign competitors, such as China, will enact and implement a global minimum tax under the same terms or the timetable agreed upon in the OECD .
Finally, suggestions that the United States could implement Pillar I entirely without the advice and consent of two-thirds of the Senate through the treaty process are highly problematic. . . . [A]Suggesting that Pillar One can be implemented in the absence of treaty ratification is a radical departure from previous precedent and calls into question the binding nature of any such agreement, threatening the tax certainty that many of our companies and this administration claim to pursue. The first pillar.
The senators ended the speech with a detailed list of questions regarding the proposals, emphasizing that any chance of a bipartisan outcome would require greater transparency and involvement from the Treasury.
The letter was signed by all Republican Finance Committee members:
- Mike Crabow (R-Idaho, rating member)
- Chuck Grassley (Iowa)
- John Cornyn (Texas)
- John Thune (South Dakota)
- Richard Burr (North Carolina)
- Rob Portman (Ohio)
- Pat Tommy (Republic of Pennsylvania)
- Tim Scott (South Carolina)
- Bill Cassidy (R-Louisiana)
- James Lankford (Oklahoma)
- Steve Danes (R-Montana)
- Todd Young (Republic of Indiana)
- Ben Sassi (R-Nebraska)
- John Barrasso (R-Wyoming)
The full text of the message can be read here or under.
Dear Secretary Yellen,
We remain focused on ensuring that the agreement reached at the Organization for Economic Co-operation and Development (OECD)/G20 on international taxation allows US businesses and workers to remain in the global competition. As this department failed to provide us with the details necessary to evaluate the agreement, we renew our request for this information.
Historically, US participation in OECD negotiations has enjoyed broad bipartisan support due to the primary goal of eliminating discriminatory digital services taxes (DSTs). Rather than prioritizing this common goal, this administration’s focus has shifted to its domestic agenda of increasing taxes on US corporations, including through higher global minimum taxes. The administration’s rush to reach political agreement, tied with domestic spending plans and the pursuit of revenue, has come at the expense of comprehensive analysis and meaningful engagement with Congress and the business community, and may ultimately endanger corporate America.
Given the potential for this agreement to jeopardize US competitiveness, we remain concerned about the lack of detail behind the approach proposed under Pillar I and its lack of grounding in any identifiable tax principles. Although you stated that Pillar One would be “largely revenue-neutral” for the United States, you declined to provide us with analysis to support your claim. It also undermined this assertion by acknowledging that open design features may “materially affect US companies and the financial position of the United States relative to other countries”.
We are also concerned that the timetable for implementation of Pillar 1 approved by this administration is unrealistic. Recent agreements made by the administration allow the current daylight saving time to remain in place, pause all US retaliatory options, and require implementation by December 31, 2023 in order to eliminate daylight saving time. Given the number of open issues remaining and the need for all countries to achieve consensus, implementation by 2023 is likely not achievable. These agreements appear to eliminate any US influence, while attempting to manipulate Congress to act – likely to the detriment of US businesses and revenues – in order to achieve daylight saving time relief.
Also of concern is the Treasury’s continued insistence that the US again move first by significantly increasing the US global minimum tax. The United States actually acted first when the Global Low Tax Income Tax (GILTI) was enacted – four years ago. However, the United States remains the only country that imposes minimum global taxes on its corporations. Since the second pillar does not require other countries to adopt a global minimum tax, we are not confident that our largest foreign competitors, such as China, will enact and implement a global minimum tax under the same terms or the timetable agreed upon in the OECD .
Finally, suggestions that the United States could implement Pillar I entirely without the advice and consent of two-thirds of the Senate through the treaty process are highly problematic. Constitutional concerns aside, any proposal for implementation through an executive agreement between Congress at this point is wholly inappropriate: this administration has chosen not to engage with Congress to establish a legislative procedure setting out objectives for OECD negotiations or to provide a detailed oversight and consultation process. The administration cannot now assert that it has the authority to enter into such an agreement. In general, any suggestion that Pillar 1 could be implemented in the absence of treaty ratification is a radical departure from previous precedent and raises the question of the binding nature of any such agreement, threatening the tax certainty that many of our companies and this administration claim to seek under Pillar I.
Any chance of a bipartisan outcome will require greater transparency and participation. We ask that you provide prompt answers to the following questions regarding these proposals:
- Please provide your estimate of how many US companies will be in scope under Pillar I.
- While we understand that there are open design issues, Treasury has clearly conducted an analysis and identified a set of potential outcomes. Please provide point estimates of the following, and describe the major design issues on which these estimates are based:
- The amount of profit to be reallocated between the United States and foreign countries, including a breakdown of estimated amounts by country.
- Impact of Pillar One’s net income on the United States.
- The Joint Commission on Taxation (JCT) has long been involved in OECD negotiations at the request of both congressional tax writing committees. If you do not wish to share this information directly with our members, will you commit to providing the JCT with this information so that they can provide independent, confidential analysis?
- Please provide a proposed plan for the implementation of the first pillar, including:
- Treasury’s proposed approach to implementation, including expected treaty actions, local legislation, and changes to our competent authority agreements.
- The timetable proposed by the United States Department of the Treasury for the implementation of the first pillar.
- If the Treasury’s position is that treaty action will not be necessary to implement Pillar I, by what means and by what authority will the United States enter into a multilateral agreement? Please provide a detailed analysis of how the permanent establishment provisions of each of the United States bilateral tax treaties have been modified through means other than the formal treaty approval process.
- If Pillar One is not implemented by December 31, 2023, will US companies have any right to receive DSTs collected between now and that date? Will other countries be free to activate DST at that time?
- What are the OECD’s plans for public consultation with stakeholders, including Congress and the US business community, prior to finalizing design and implementation plans? What efforts is the Treasury Department making to ensure meaningful public consultations?
- What commitments, if any, has China made regarding its timing to implement a global minimum tax of 15 per cent? Has any of the other 134 countries acceding to the agreement made an implementation commitment to you?
We will continue to engage in good faith in assessing the effects of this agreement on American workers, businesses, and revenue. However, this administration’s current position of denying our requests for material, relevant information made this decision impossible.
We appreciate your interest in these issues and look forward to your timely response to our questions.