Centrist Democrats warn foreign tax plan could hurt US competitiveness
Three liberal House Democrats are urging party leaders to “withhold” a significant portion of President Biden’s tax plan, which would raise the minimum rate that US corporations pay on their foreign income.
In a letter to House Speaker Nancy Pelosi, D-Calif., and House Ways and Means Chairman Richard Neill, D-Mass., lawmakers said they want to wait and see how other countries implement a new global agreement. do which will install a 15. % Minimum rate on multinational corporations, regardless of their headquarters. That deal, signed by 136 countries and jurisdictions this month, could take years to be implemented around the world.
Centrist Democrats warned that otherwise, a plan by the tax-writing House Ways and Means Committee to increase the current levy on companies’ foreign earnings — known as the global intangible low-tax income (GILTI) rate — could lead to US firms will suffer. A plan released last month called for raising the GILTI rate from 10.5 per cent to 16.5 per cent.
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“I would encourage the leadership to move forward with GILTI and international tax changes at this time,” the letter said. “We have to find a new route to ensure that we don’t run before the rest of the world to implement a new GILTI regime. Well though, GILTI changes as proposed could potentially outweigh their foreign counterparts. will reduce American competition and result in American job losses.”
The letter, first reported by Politico, was signed by Reps Tom O’Halleran of Arizona, Lou Correa of California and Henry Kueller of Texas, all members of the New Democrat coalition.
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“These new rules in the Ways and Means draft will allow other countries to take advantage of our rules and harm US companies,” he said. “If we wait, it will give Congress an opportunity to adjust policy implementation based on how G-20 countries write their GILTI regimes.”
The global tax deal, backed by finance ministers from the Group of 20 countries, is designed to target corporations that use a variety of methods to reduce their tax liability by moving profits and revenues often to low-tax countries such as Bermuda. adopt strategy. Cayman Islands or Ireland, regardless of where the sale was made. Billions of US dollars are spent every year as practiced by US and foreign multinationals Treasury Department.
The agreement calls for a 15% minimum rate on companies with an annual turnover of more than 750 million euros, or approximately $866 million.
The OECD estimated that the agreement, signed by 136 countries and jurisdictions, would reallocate profits of about $100 to $125 billion to countries around the world, some of the world’s largest and most profitable multinational corporations, Thus “ensuring that these firms pay a fair share of tax wherever they operate and make profits.”
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Democrats are using revenue generated from tax increases on companies’ foreign profits to help pay for their broader tax and spending bill. Ending the GILTI increase would leave Democrats less money for the package, which aims to dramatically expand the social safety net.
According to estimates by the Joint Committee on Taxation, the increase in the GILTI rate and other international tax changes would create about $300 billion in new revenue.