US limbers up to slug tech giants with global deal on tax

Treasury Secretary Janet Yellen is confident the US will join the most sweeping overhaul of global tax rules in a century.

Treasury Secretary Janet Yellen: ‘I hope … we will be able to reassure the world that the US will do its part.’ Picture: AFP

Treasury Secretary Janet Yellen is confident the US will join the most sweeping overhaul of global tax rules in a century, a move agreed by 136 countries and which promises to sharply curtail tax avoidance by multinational corporations.

She said she was “confident” congress would pass legislation to implement the agreement brokered by the OECD, which sets a global tax of 15 per cent and is aimed at stopping corporations from slashing tax bills by registering in nations with low rates.

The move could hit companies such as Facebook, Google and Apple particularly hard.

“I am confident that what we need to do to come into compliance with the minimum tax will be included in a reconciliation package,” Ms Yellen told America’s ABC, referring to the US federal budget bill currently being debated in congress. The multi-trillion-dollar spending package is the cornerstone of President Joe Biden’s economic agenda.

Budget reconciliation is a political move that would allow Democrats, who control the House of Representatives and Senate by a slim majority, to act without ­Republican votes.

“I hope that … it will be passed and we will be able to reassure the world that the United States will do its part,” she said.

She added that the “historic” global tax pact would “stop what’s been a decades-long race to the bottom on corporate taxation, where countries try to cut their taxes to attract our businesses, to make it harder to keep jobs in the United States”.

The 136 nations now on board with the tax agreement represent 90 per cent of global gross domestic product.

Under the deal, they will be able to generate about $US175bn ($239bn) in additional revenue each year.

Each country in the deal must now incorporate the agreement into its own legislation. However, some questions remain, such as the Biden administration’s ability to get the reform through congress.

Democrats want to include the measure in the $US3.5 trillion infrastructure spending package, but their majority in the Senate is so small that the party cannot ­afford any defections among their ranks. Two Democratic senators say the amount, which is intended to fundamentally reform US ­infrastructure and combat climate change, is too high.

The additional revenue from the international minimum tax would help finance Mr Biden’s plans.

AFP