© Reuters. Treasury Secretary Janet Yellen testifies before the Senate Banking, Housing and Urban Affairs Committee hearing titled “Financial Stability Oversight Committee’s Annual Report to Congress” at the Dirkerson Senate Office Building in Washington, D.C.
WARSAW (Reuters) – U.S. Treasury Secretary Janet Yellen thanked Polish leaders on Monday for hosting millions of Ukrainian war refugees, but urged them to back the European Union’s plan to implement a 15 percent global minimum tax for businesses.
Poland, the only opponent of the EU’s implementation plan, rejected a compromise in April to kick-start a 137-nation deal struck last October aimed at ending a competitive decline in corporate tax rates.
Poland’s new finance minister, Magdalena Rzeczkowska, seeks to create a “legally binding” link between the global minimum tax and another pillar of the tax negotiations – redistributing some of the tax rights of large, highly profitable multinationals to “where their services are located” market state”. and product sales.
For some countries involved in the OECD negotiations, the so-called “pillar one” plan is the more hopeful global tax change that would allow them to receive revenue from big U.S. tech giants such as Google parent Alphabet (Nasdaq) . :), Facebook (NASDAQ:) owner Meta, Amazon.com (NASDAQ:) and Apple (NASDAQ:).
But the redistribution pillar was not part of the October deal, nor was it fully developed. The more complex plan would require revising international tax treaties, and Rzeczkowska expressed concern that if it failed, the global minimum tax would unduly burden European businesses.
Bruno Le Maire, the current EU finance minister and French finance minister, has cast doubt on these arguments amid the ongoing legal dispute between Poland and the EU.
Yellen met with Polish Prime Minister Mateusz Morawiecki and will be followed by meetings with Reckoska and Central Bank Governor Adam Grapinski.
In a statement from the Treasury Department after the Morawiecki meeting, Yellen emphasized the need for Poland to move forward with the tax deal, as it would “increase critical revenue for the benefit of Polish and U.S. citizens.”
EU Tax Observatory estimates https://www.taxobservatory.eu/wp-content/uploads/2021/10/Note-2-Revenue-Effects-of-the-Global-Minimum-Tax-October-2021.pdfThis The tax will bring Poland 2 billion euros ($2.08 billion) in annual revenue, which helps cover the high cost of hosting Ukrainian refugees.
“It is important that these revenues will be paid by large multinational corporations, not Polish individuals or small businesses,” said a source familiar with the tax discussions, adding that this would allow Poland to build on its skilled and low-cost base compete on. Labour and economic fundamentals. The source was not authorized to speak publicly about the issue and declined to be named.
The Treasury Department said Yellen “expressed gratitude for Poland’s generosity in welcoming refugees from Ukraine” and discussed the state of energy in Europe and a review of investments in Poland to protect national security.
Uncertainty in America
Yellen also needs to reassure Polish officials about the growing uncertainty over the U.S. implementation of a global minimum tax, said Manal Corwin, head of KPMG’s Washington state tax practice and a former U.S. Treasury official.
The U.S. Congress needs to approve changes to the current 10.5% U.S. Global Overseas Minimum Tax, known as “GILTI,” to raise the rate to 15% and convert it to a country-by-country system.
The changes were originally included in President Joe Biden’s sweeping social and climate spending bill, which stalled last year amid opposition from centrist Senate Democrats.
With midterm congressional elections looming and lawmakers expressing concerns about increasing spending amid high inflation, the prospect of scaling back spending plans with tax changes looks increasingly difficult.
But Corwin said the lack of U.S. implementation likely wouldn’t stop the other 136 countries from progressing, especially if Poland were able to join the EU’s implementation.
“If the EU directive is successful, I think the rest of the world will change whether the U.S. changes or not,” Corwin said. “So my sense is that it’s not as worrying for the country as it used to be.”
Tax experts say the EU implementation will eventually put pressure on the U.S. to adopt the changes, as some of the taxes U.S. multinationals pay under the regime will go to foreign jurisdictions rather than the U.S. Treasury.
Yellen has overturned past objections from the Trump administration to a global taxing rights deal and has succeeded in persuading diehards to accept it. These include Ireland, which agreed to raise the current corporate tax rate of 12.5% to a minimum of 15%.
Josh Lipsky, director of the Atlantic Council’s Centre for Geoeconomics, said: “She’s talked and lobbied about this everywhere, including Ireland, and she’s managed to win, so I’m not going to be in a tax deal. Make a bet with her.”
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