G20 ministers take up plan to deter cross-border tax dodging

Jul 9, 2021, 2:08 AM | Updated: Jul 11, 2021, 1:13 am
Haruhiko Kuroda, Governor of the Bank of Japan, center, arrives for a G20 meeting of Economy and Fi...

Haruhiko Kuroda, Governor of the Bank of Japan, center, arrives for a G20 meeting of Economy and Finance ministers and Central bank governors, in Venice, Italy, Friday, July 9, 2021. (AP Photo/Luca Bruno)

(AP Photo/Luca Bruno)

A sweeping effort to deter cross-border tax dodges by multinational companies that have cost governments billions tops the agenda as finance ministers from the world’s major economies meet in Venice.

Approval of the international tax package seems likely at the Group of 20 gathering that started Friday and continues Saturday. But the proposals backed by U.S. President Joe Biden face a key hurdle in the U.S. Congress, where Republicans have vowed to oppose them.

Prospects for a reaching a final deal later this year improved after Biden proposed setting a 15% global corporate minimum tax rate, resulting in a breakthrough in stalled international talks. An agreement was reached July 1 among 131 countries in negotiations convened by the Paris-based Organization for Economic Cooperation and Development.

The deal aims to discourage the use of often-complex accounting schemes to move profits to where the least tax is due.

The OECD deal asks countries where companies are headquartered to enact the minimum tax so that their companies would pay tax at home — even if they shift profits to subsidiaries in low-rate countries overseas, so-called tax havens. Countries have lowered their tax rates to attract the revenue, moves described by U.S. Treasury Secretary Janet Yellen as a global “race to the bottom” that the proposal could stop.

Another part of the tax package would let countries tax a portion of the profits of large and profitable companies that have no physical presence but make significant amounts of money there, such as through digital businesses like online retailing and advertising.

Endorsement by the G-20 finance ministers is likely since all 20 member countries — representing more than 80% of the global economy — signed the deal at the OECD. A thumbs-up would mean more technical work at the OECD, followed by a bid for final approval at a Group of 20 leaders’ summit Oct. 30-31 in Rome hosted by Italy, which has the rotating G-20 chair.

Adam Posen, president of the Peterson Institute for International Economics, said it was an opportunity the U.S. and the world should not miss. Asked how he would describe the deal to non-economists, he said, “right now we got a bunch of countries ripping us off by essentially giving kickbacks to many American big multinationals, to pay their taxes there instead of in the U.S…. if we make this deal we can stop it cold, so let’s stop this kickback game that some of these countries are playing.”

But there are political issues to be cleared up. For one, there is friction over the EU’s plans to impose what it calls a “digital levy” to help pay for pandemic recovery spending.

The OECD deal commits countries to drop or refrain from their own digital services taxes largely aimed at U.S. tech companies such as Google and Amazon — a key demand from the Biden administration, which considers such unilateral taxes to be unfair trade practices. European officials have downplayed concerns, saying their digital tax will not clash with the OECD agreement. U.S. officials are not convinced; the EU will not unveil the plan until later this month and it’s not clear what’s in it.

And though Biden was successful on the international stage in winning backing for the deal, he faces opposition from Republicans at home.

The U.S. already has a tax on big companies’ overseas earnings, but Biden seeks to roughly double the rate to 21%. As part of a broader plan to raise money for infrastructure and clean energy investment, the administration is further urging Congress to boost the U.S. domestic corporate tax rate from 21%, where it is currently, to 28%. Support for the global minimum is regarded as a boost to domestic passage of Biden’s plans.

Rep. Kevin Brady of Texas, the top Republican on the tax-writing Ways and Means Committee, blasted the OECD deal, saying, “This is an economic surrender to China, Europe and the world that Congress will reject.”

The Peterson Institute’s Posen said it was difficult to see how the global deal could work without the U.S. joining it: “If the U.S. doesn’t deliver, it may not survive, or it will survive but in a not very functional way… It’s very difficult to imagine Europe, Japan and China getting together on this without the U.S. chipping in.”

The administration plans to bypass the need to get 60 votes in an evenly divided 50-50 Senate by using a legislative tool known as budget reconciliation, which will only require a majority vote to pass the foreign profits rate.

The part of the deal letting countries tax companies with no physical presence would require countries to sign a diplomatic agreement. Posen said that on tax matters, that would likely be a treaty requiring a two-thirds majority in the Senate. That might be difficult given the partisan environment, despite the provisions removing burdensome national digital tax taxes on U.S. tech companies.

While GOP lawmakers remain opposed to tax increases, Mark Zandi, chief economist at Moody’s Analytics, thinks the Biden administration will be able to achieve much of what it wants in the tax area, both domestically and internationally.

“There is a general view around the world that corporations have to pay more to help shoulder the burden of dealing with climate change, income inequality and other government needs,” said Mark Zandi, chief economist at Moody’s Analytics. “Corporations have been doing very well and their profits are up.”

___

Crutsinger contributed from Washington, D.C. Associated Press writer Sylvie Corbet contributed from Paris.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Republican gubernatorial candidate state Sen. Brian Dahle, left, talks with fellow GOP state Sen. A...
Associated Press

Newsom’s opponent: I’m reasonable, not a ‘crazy Republican’

SACRAMENTO, Calif. (AP) — Brian Dahle, the Republican Party’s longshot hope to unseat Gov. Gavin Newsom in California, knows that to win in his progressive home state he can’t allow Democrats to label him as an election denying, abortion-hating, gun-loving, bombastic right-winger. It’s why Dahle, an affable farmer and state senator from the sparsely populated […]
22 hours ago
Associated Press

Today in History: July 5, Doby is AL’s first Black player

Today in History Today is Tuesday, July 5, the 186th day of 2022. There are 179 days left in the year. Today’s Highlight in History: On July 5, 1947, Larry Doby made his debut with the Cleveland Indians, becoming the first Black player in the American League three months after Jackie Robinson broke the color […]
22 hours ago
Hong Kong Chief Executive John Lee speaks during a news conference in Hong Kong, Tuesday, July 5, 2...
Associated Press

Hong Kong’s John Lee stresses balance in easing quarantine

HONG KONG (AP) — Hong Kong’s new leader John Lee said Tuesday at his first news conference since taking office that he will work on easing restrictions for travelers while balancing the risks of a coronavirus outbreak overwhelming the health care system. Hong Kong and mainland China are among the few places in the world […]
22 hours ago
FILE - Xiao Jianhua, a Chinese-born Canadian billionaire talks to reporters outside the Internation...
Associated Press

Canada says China bars diplomats from Canadian tycoon trial

BEIJING (AP) — Chinese authorities refused to allow Canadian diplomats to attend the trial of a Chinese-born Canadian tycoon who disappeared from Hong Kong five years ago, Canada’s government said Tuesday. Xiao Jianhua was last seen at a Hong Kong hotel in January 2017 and is believed to have been taken to the mainland by […]
22 hours ago
This image released by Bleecker Street shows Freida Pinto, left, and Zawe Ashton in a scene from "M...
Associated Press

‘Minions’ set box office on fire with $108.5 million debut

Families went bananas for Minions this weekend at the movie theater. ” Minions: The Rise of Gru ” brought in an estimated $108.5 million in ticket sales from 4,391 screens in North America, Universal Pictures said Sunday. By the end of the Monday’s July Fourth holiday, it will likely have earned over $127.9 million. The […]
22 hours ago
Associated Press

Firefighters battle fresh wildfire in Northern California

BRIDGEPORT, Calif. (AP) — Firefighters in Northern California were battling a fresh wildfire that broke out Monday east of Sacramento and forced a number of evacuations. The fire burning in Amador County quickly spread to 959 acres (388 hectares) as of just after 7 p.m. Monday, according to Cal Fire. The fire agency had said […]
22 hours ago

Sponsored Articles

(Courtesy Condor)...
Condor Airlines

Condor Airlines shows passion for destinations from Sky Harbor with new-look aircraft

Condor Airlines brings passion to each flight and connects people to their dream destinations throughout the world.
...
Christina O’Haver

BE FAST to spot a stroke

Every 40 seconds—that’s how often someone has a stroke in the United States. It’s the fifth leading cause of death among Americans, with someone dying of a stroke every 3.5 minutes.
...
Carla Berg, MHS, Deputy Director, Public Health Services, Arizona Department of Health Services

ADHS mobile program brings COVID-19 vaccines and boosters to Arizonans

The Arizona Department of Health Services and partner agencies are providing even more widespread availability by making COVID-19 vaccines available in neighborhoods through trusted community partners.
G20 ministers take up plan to deter cross-border tax dodging