PARIS – Congress will not abide by the global tax deal unilaterally negotiated by the Biden Administration with European officials, warned a delegation of Ways and Means Republicans yesterday in Paris. The delegation, led by Chairman Jason Smith (MO-08), met with Organization for Economic Co-operation and Development (OECD) officials to discuss the impact of the deal on the U.S. economy, including how it would give foreign competitors like China an economic advantage and cause the United States to forfeit over $120 billion of tax revenue over the next decade. Ways and Means members also noted that the Biden Administration lacks constitutional authority to write U.S. tax laws, and current negotiations at the OECD would permit foreign countries to impose unfair taxes on American workers and make the United States less competitive in the global economy. Below are excerpts from the meeting.
On Digital Service Taxes:
Rep. Ron Estes (KS-04): “…We need good trade and tax policies because nothing has lifted more people out of poverty over the last 80 years than being able to have good open markets and trade practices…A lot of our colleagues, both Democrat and Republican, recognize that having a disjointed multinational set of Digital Service Taxes (DST) was not appropriate…We are concerned–like a lot of the other member countries are concerned–that we don’t want something that’s unfair to their businesses or their workers or their tax base.”
On the economic impact of adopting the OECD deal:
Rep. Kevin Hern (OK-01): “I guess what we’re hearing today and I’m using JCT – this isn’t a partisan number – but it’s either $60 billion we’re going to lose, or up to $120 billion. And by the way, the best-case scenario is that we adopt Pillar Two, and everybody else does not – which we know, that’s not going to happen. So I guess my question is, is it our understanding that our representative to the OECD is perfectly okay with changing a tax policy that at the bare minimum removes $60 billion of U.S. tax dollars from the U.S. economy and sends them around the world. Is that what we’re hearing?
On Congress’s constitutional role in writing tax laws:
Rep. Carol Miller (WV-01): “I am from southern West Virginia, and I am a small business owner and as a business owner, two things that always stand out is we want consistency…for Congress, who is the tax-writing body in the U.S. government, the time to engage with this has long passed because there’s very little chance that these kinds of things are going to pass until things are renegotiated and concerns are addressed. The project has gotten out of control, and that the U.S. tax base is becoming more of a golden egg to fund foreign governments… I strongly urge that the OECD puts the brakes on rushing the negotiations and to ensure either the GILTI is grandfathered in or that the guidance around the UTPR is drastically scaled back and the U.S. and our companies will not become a source for foreign nations who have driven away competition and innovation through their own draconian domestic policies.”
On promoting fairness in tax policy:
Rep. Greg Murphy (NC-03): “The theme of what you’re hearing from us is fairness. It’s come out of COVID a little bit where people are searching for revenues, and the United States has always seemed to be a target-rich environment for creating revenue. And I believe what we have back in the United States is actually an Administration that is willing to give away American profits. However, Democrats and Republicans, hearing from members in their district, are not so happy for that to come. You know, I’m a surgeon by trade. And so for me, the devil is in the details. The complexity with gathering tax from many different countries from United States companies is mind boggling to say the least. We believe in fairness, but we don’t believe this proposal is being fair to the United States right now. And good luck trying to collect the taxes.”
Additional concerns with Pillar 2:
Rep. Michelle Steel (CA-45): “There is much concern for Pillar two because it’s going to result in double taxation and it’s just not really fair when you imagine that it’s going to be almost like the wild wild west.”
Rep. Randy Feenstra (IA-04): “I think we have to put the brakes on and truly ask the companies: How does this play out? What does this look like? And I can see all kinds of cases in front of our court that deal with proprietary information as we move forward. What accounts for what’s accepted as “generally accepted accounting principles”? And obviously, there are different countries that have robust R&D tax credits, whether they be refundable. I think of countries like China and so forth that have significant R&D tax credits and so forth that can be applied and yet the U.S. credits cannot be applied because it’s not refundable. That is a great concern. You start going down these paths, we need a level playing field.”
Rep. Nicole Malliotakis (NY-11): “To summarize my four concerns with the OECD deal: One, it ignores the fact that the U.S. already has a global tax. Two, it turns over our tax authority, which is the sole discretion of the United States House of Representatives and the Ways and Means committee, to other countries. So that’s a concern among the membership on our Committee, and as Randy said, it is an accounting nightmare for American businesses. There has been zero guidance issued publicly and we’re having a hard time grasping this information from our Secretary of Treasury. And lastly, to re-emphasize the point: China has easily abused the system at a time when we’re all concerned about China, and its aggression has manipulated many international organizations. I think there’s a real concern here that we’re giving them an advantage. The fact that Chinese government subsidies are treated differently than the American R&D tax credit is certainly a concern.”