U.S. Sen. Tim Scott (R-SC) joined his fellow Republicans on the U.S. Senate Finance Committee last week to again request information from the U.S. Department of the Treasury on international tax negotiations — particularly digital services taxes — that they said could significantly impact American workers, businesses, and revenue.
“We remain focused on ensuring the agreement reached at the Organisation for Economic Cooperation and Development (OECD)/G20 regarding international taxation allows U.S. businesses and workers to remain globally competitive,” they wrote in a Dec. 22 letter sent to U.S. Treasury Secretary Janet Yellen. “Because this administration has failed to provide us with the detail necessary to evaluate the agreement, we renew our request for this information.”
The OECD/G20 this fall reached an agreement to reform the international tax system, ensuring that Multinational Enterprises will be subject to a minimum 15 percent tax rate starting in 2023. The deal was agreed to by 136 countries and jurisdictions representing more than 90 percent of global GDP. It sets up a two-pillar solution to fundamentally reform international tax rules.
In their letter, the senators raised concerns with how the negotiations to reach the agreement may negatively impact U.S. competitiveness; the commitment from the United States to increase its global minimum tax before any other country; and suggestions that Treasury could implement the agreement without the advice and consent of the Senate, bypassing the treaty process.
For instance, Sen. Scott and his colleagues wrote that they remain concerned with the lack of detail underlying the approach being proposed under Pillar One of the agreement and “its lack of foundation in any discernible tax principles.”
“Although you have stated that Pillar One will be ‘largely revenue neutral’ to the United States, you have refused to provide us with an analysis substantiating your claim,” the senators wrote Yellen. “You have also undercut this assertion by acknowledging that open design features may ‘materially impact American companies and the fiscal position of the United States relative to other countries.’”
Additionally, Sen. Scott and the committee members wrote that the Pillar One implementation timeline agreed to by the Biden administration is not realistic.
“Given the number of open issues remaining and the need for all countries to achieve consensus, implementation by 2023 is likely unachievable,” the senators wrote. “These agreements appear to eliminate any U.S. leverage while attempting to manipulate Congress to act — potentially to the detriment of U.S. businesses and revenue.”
The senators concluded with a detailed list of questions for Yellen regarding the proposals. They reiterated that any opportunity for a bipartisan outcome will require greater transparency and engagement from Treasury.
“We will continue to engage in good faith to evaluate the effects of this agreement on American workers, businesses, and revenue,” wrote Sen. Scott and his colleagues. “However, this administration’s current posture of stonewalling our requests for relevant, material information has made it impossible to make this determination.”
Among the 13 other GOP lawmakers who joined Sen. Scott in signing the letter were U.S. Sens. Richard Burr (R-NC), Rob Portman (R-OH), Bill Cassidy (R-LA), Steve Daines (R-MT), and Todd Young (R-IN).