Failure to negotiate could cause EU-US relations to deteriorate. The Organization for Economic Cooperation and Development’s new tax chief has a big Hill to climb.
KPMG’s Manal Corwin still has until April to move from D.C. to Paris and get her feet under the desk at the global standard-setter and think tank. But she’ll already be aware of the steep challenge she faces in trying to convince a Republican-held Congress to get onboard with the global program for tax reform.
The pressure is on. Failure could reignite the threat of a trade war between the U.S. and the EU, which is already seething over Washington’s $369 billion Inflation Reduction Act (IRA).
It wasn’t supposed to be this hard. More than 135 jurisdictions, including the U.S., signed up to the global corporate tax reform package in 2021. The deal aims to obliterate corporate tax havens and ensure that global companies, including U.S. tech giants, pay their fair share in tax. It’ll be on Corwin to ensure the accord is implemented properly.
Now that Republicans have taken control of the House, it looks like mission impossible.
“They are tax increases which will undermine American competitiveness while handing new authority to tax American companies to our economic competitors,” said Adrian Smith of Nebraska, who was the top Republican on the trade subcommittee on Ways & Means last Congress. “If President Biden was serious about protecting American workers and jobs, he would direct Secretary Yellen to go back to the table and reopen negotiations.”
The deal is built on two pillars. Pillar 1 aims to distribute corporate tax profits of the world’s 100 biggest companies to countries wherever they sell goods and services. Pillar 2 sets an effective minimum corporate tax rate of 15 percent for companies with annual revenue of at least $750 million.
The EU set the pace in December after securing an agreement among 27 capitals to write Pillar 2 into their national statutes. While work is still ongoing on Pillar 1 at the OECD, tax enthusiasts and policymakers have turned their gaze toward Congress to see whether it will follow Europe’s lead on Pillar 2.
But any push to get the U.S. on board is destined to clash with Republicansnwho are as determined as ever to protect sovereignty over tax policy.
OECD
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