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Even Experts Say Biden’s Global Tax Surrender Is Far From a Done Deal

July 06, 2021

Contrary to White House claims that “momentum” will propel forward President Biden’s global tax surrender, there has been little measurable progress toward resolving longstanding obstacles to a global tax agreement. In fact, many media outlets have highlighted the enormous challenges that could stop the proposal dead in its tracks. Here are a few:

POLITICO: There’s a global tax deal – Now comes the hard part

“What didn’t get a lot of coverage is that the deal is the product of bitter last-minute debate, they still have a lot of work to do on how to make that agreement work in practice, and it won’t be operational until at least 2023.”

“What could sink the deal? Lack of unity in the European Union, and lack of unity in Congress. An Irish official told POLITICO: “the government of Ireland supports rational global tax reform. But Ireland cannot sign on to generalized language that does not include cast-iron assurances on specific issues and policies that matter to us.”

“REALITY CHECK: Many U.S. news outlets ran headlines Thursday suggesting the world decided to join Biden on a tax fairness bandwagon. The reality is far more complicated: this process is run by the Paris-based Organization for Economic Cooperation and Development.”

Financial Times: Global tax deal faces challenges of detail, implementation and holdouts

“…some detail remains to be decided and domestic legislation completed, and holdout nations still have not been won over.”

“The refusal of three EU member states is embarrassing for Brussels and could pose a practical problem… [EU] tax directives require unanimity; it is unclear whether the refuseniks will veto a directive.”

Irish finance minister Paschal Donohoe said: “[T]here was not enough clarity or enough information . . . to sign up.”

“Tax experts warned it would not be straightforward because each country needs to legislate at its own pace. In the US, for example, President Joe Biden must seek congressional approval for at least some parts of the agreement — and Republicans are likely to oppose it. Some countries are reluctant to withdraw their taxes until the US legislative process has succeeded.”

Manal Corwin, head of Washington national tax at KPMG and formerly the US deputy assistant secretary for tax policy (international affairs): Agreeing the details would “require a fair amount of work”, and warned that “the timeline for implementation is quite ambitious”.

WSJ: Ireland Could Derail Global Tax Reform

“While getting new tax legislation approved in Washington is no easy task, it also only takes one holdout in Brussels to block reform.”

“European Union tax legislation requires unanimous approval, so Ireland has the power to stop any changes and has fellow holdouts Hungary and Estonia for company.”

“Negotiations will be fierce and pressure high, but a stalemate is possible if Dublin sticks to its guns.”

“Digital services taxes add a layer of complication. Created specifically to tax the U.S. tech giants… most capitals had promised to give them up if the OECD reached a deal, but the legislative challenges in Washington and Brussels are causing them to hesitate. While dropping the DSTs would show goodwill, keeping them in place creates pressure for lawmakers to act.”

Bloomberg: European Trio Cast Dissatisfied Shadow Over Global Tax Accord

“The dissent underscores how more time and flexibility may be needed to convince global holdouts just as the discussion shifts to the Group of 20.”

“In Estonia meanwhile, the finance ministry issued a statement saying that the country wasn’t ready to ‘fully endorse’ proposals for a global minimum tax, and in response to questions from Bloomberg, insisted that the current proposal is ‘still too vague to predict our final position.’”

“Hungarian Prime Minister Viktor Orban, who has slashed corporate tax rates to 9% as part of tax cuts, has called the plan ‘absurd.’ He credits his policies with drawing foreign investments, including carmakers such as BMW and some of the biggest battery plants in Europe.”

“The U.S. Congress could also prove a major obstacle, since the legislature’s approval would be required to formalize Washington’s participation in the system. President Joe Biden’s Democratic party holds razor-thin majorities that are at risk in next year’s midterm elections.”