Treasury Secretary Janet Yellen indicated the US will be unable to sign a treaty on global tax rules in time to uphold a deal that prevents other countries from imposing new levies on some of the largest American tech companies.
(Bloomberg) — Treasury Secretary Janet Yellen indicated the US will be unable to sign a treaty on global tax rules in time to uphold a deal that prevents other countries from imposing new levies on some of the largest American tech companies.
Earlier this year, the US won an extension of a pledge from other jurisdictions to refrain from new Digital Services Taxes, or DSTs, that hit the revenues of firms like Alphabet Inc.’s Google and Meta Platforms Inc.’s Facebook.
In exchange, President Joe Biden’s administration said it would sign a treaty by the end of 2023 on rules governing who gets to tax the world’s largest, most profitable firms.
“There are some matters that are important to the US and other countries that remain unresolved, open issues that still must be resolved before the treaty can be signed,” Yellen said after meeting with European counterparts in Luxembourg. “So this process will take into next year.”
The transatlantic partners have for years been negotiating how to reform tax rules governing the largest multinational firms. The talks became acrimonious after European countries lost patience with the inertia and introduced DSTs, which the US responded to with threats of trade tariffs.
A deal struck in 2021 is key to avoiding a return of those tensions that plagued transatlantic relations during the Trump administration.
After repeated delays in preparing implementation, the OECD last week presented the legal text that sets out who can levy the profits of the world’s biggest corporations. To advance toward ratification, a critical mass of countries — including the US — must first sign the text.
“In the US it has been circulated for comment for the next 60 days,” Yellen said. “It’s critically important for a treaty of this level of importance and complexity to show it to the American public, to Congress, to the business community.”
–With assistance from Alessandra Migliaccio, Kamil Kowalcze and Jorge Valero.
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