Tax deal ‘may not be ready until 2022’

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US Treasury Secretary Janet Yellen has said a new mechanism to allow more countries to tax large, highly profitable multinational firms may not be ready for consideration by lawmakers until the spring of 2022.

Yellen on Sunday told a news conference after a G20 finance leaders meeting in Venice, Italy that the OECD “Pillar 1” reallocation of taxing rights was on a “slightly slower track” than a global corporate minimum tax of at least 15 per cent as part of a major tax deal among 132 countries.

G20 finance ministers and central bank governors endorsed the deal over the weekend, but questions remain over the ability of US President Joe Biden’s administration to persuade a deeply divided Congress to ratify the changes.

Yellen said she hoped to include provisions to implement the so-called “Pillar 2” global minimum tax into a budget “reconciliation” bill this year that Congress could approve with a simple majority.

The “Pillar 1” portion of the agreement would end unilateral taxes on digital services in exchange for a new mechanism that would allow large profitable companies to be taxed in part based on where they sell products and services, rather than where their headquarters and intellectual property reside.

This will require a multilateral tax agreement that will take time to negotiate, a Treasury official said.

“Pillar 1 will be on a slightly slower track. We’ll work with Congress,” Yellen said, when asked whether a two-thirds majority would be needed in the US Senate, which is normally the requirement for international treaties.

“It may be in ready in the spring of 2022 and we’ll try to determine at that point what’s necessary for its implementation,” Yellen said.

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