Tax changes for large firms may not be ready until 2022: Janet Yellen

Questions remain over US admin's ability to get Congress to ratify changes

US Treasury Secretary Janet Yellen said on Sunday that 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 told a news conference after a G20 finance leaders meeting in Venice in Italy that the OECD “Pillar 1” 

re-allocation 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.

‘Will encourage banks to increase their climate ambition’

Janet Yellen said on Sunday that she will soon instruct the major multilateral development banks to “increase their climate ambition” and set ambitious timelines to support the Paris Agreement on carbon emissions reductions. “I will be convening the heads of the multilateral development banks to encourage them to increase their climate ambition, both to support the most vulnerable and to incentivise private investment."  Reuters

‘Must compete on economic strengths, not low tax rates’

Janet Yellen said deterring the use of tax havens will let countries compete on economic fundamentals — instead of by offering ever-lower tax rates that deprive governments of money for infrastructure and education. “This deal will end the race to the bottom,” she said after the end of the meeting in Venice. “And this deal will give our nations the ability to raise the necessary funding for important public goods like infrastructure, R&D, and education." AP/PTI