An agreement by wealthy countries to impose minimum taxes on multinational companies faces a rocky path to implementation, with many governments likely to wait to see what others, especially a divided U.S. Congress, will do.
Treasury Secretary Janet Yellen hailed the deal, reached by finance ministers of the Group of Seven leading rich nations over the weekend in London, calling it a return to multilateralism and a sign countries can tighten the tax net on profitable firms to fund their governments.
In countries with parliamentary systems, governments can quickly deliver on pledges, turning them into local laws and regulations. In the U.S., however, a slim Democratic majority in the House, an evenly split Senate, antitax Republicans and procedural hurdles complicate passage.
Buy-in will also have to come from a broader group of 135 countries in what is known as the Inclusive Framework. Some countries with very low tax rates — such as Ireland, with a 12.5% charge on profit — are reluctant to sign up. The U.S. has proposed tax changes that would penalize companies from countries that don’t impose the minimum taxes.
Author(s): Richard Rubin, Paul Hannon, Sam Schechner
Publication Date: 6 June 2021
Publication Site: Wall Street Journal