Yellen Sues Ireland to Join Global Tax Treaty

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BRUSSELS – The US is hopeful that it will reduce Ireland’s resistance to joining the EU. global tax treaty He’s mediating, as Treasury Secretary Janet L. Yellen told her Irish counterpart this week that it’s in her economic interests to join the deal.

During her week-long trip to Europe, Ms. Yellen worked to garner more support for a global plan to end tax havens and halt profit shifting with a new global minimum tax. The agreement, backed by the 20-nation Group on Saturday, global minimum tax of at least 15 percent. It will also change how tax rights are distributed and allow countries to collect taxes from large, profitable multinational firms based on where their goods and services are sold.

“Low taxes have been an incredibly successful economic strategy for Ireland,” Ms Yellen said in an interview Tuesday before returning to Washington. “They see this as crucial to their economic success. And I think in order to comply, they probably need to be able to make the claim that it’s in the country’s interest.”

Ms Yellen had important meetings in Brussels this week with Paschal Donohoe, the head of the Eurogroup, a club made up of Irish finance minister and European finance ministers. Mr. Donohoe needs his support because the European Union requires unanimity among its members to formally join the deal, which would require changes in local tax laws.

After meeting with Ms. Yellen on Monday, Mr. Donohoe spoke in a positive tone and said he would continue to be involved in the process.

Despite growing global support for the agreement, much work remains to be done.

More than 130 countries have supported the framework of the global agreement, which will be the biggest shake-up of the international tax system in decades, but key shortcomings remain, such as Ireland, Hungary and Estonia. Stopping in Venice and Brussels on her first trip to Europe as Treasury secretary, Yellen worked with her colleagues to develop a strategy to get these countries to put their worries down and join the deal so that a final deal could be secured by October.

Ms Yellen told her Irish colleague that Ireland’s economic model would not be overturned if she increased the tax rate from 12.5 percent. Biden’s management offered.

The Biden administration believes that if the deal goes into effect, it will end the “race to the bottom” in corporate taxes and herald a new era of corporate governance that will help nations finance new infrastructure investments and reduce inequality. More tax justice could also help repel the rise of right-wing populists who have come to power around the world in a wave of frustration that working-class citizens are being forgotten by the elite.

“Globalization does not only serve to enrich the rich and harm the poor,” Yellen said. “More broadly, the international tax piece is about that.”

Top economic officials are working through the intricate details of the global tax plan and will work to wrap them up in the coming months. A thorny issue that came up at the G20 meetings in Venice last weekend was how to allocate worldwide tax revenues to the largest and most profitable companies as part of a new tax.

Selling the deal in the US may be the biggest challenge. Congress is narrowly divided, and Republicans are adamant that they won’t support tax increases, giving the Biden administration a narrow margin for success even if it could pass most of the proposed tax changes with only Democrats’ votes.

Republican lawmakers complained that the U.S. “supplied” the tax base by allowing other countries to impose new taxes on companies. For example, in some cases, China will be able to collect new tax revenue from American businesses selling products there. However, the United States will likely be able to collect taxes from some Chinese companies doing business in the United States. It is unclear whether China will make a net profit from this part of the deal.

Ms Yellen portrayed the global tax as part of a broader economic calculation that the Biden administration believes must be done to prepare the United States and the rest of the world for future fiscal needs.

Citing the Biden administration’s tax plans, which include raising the corporate tax rate from 21 percent to 28 percent, as central to this approach, he said the administration wants to address what it sees as the injustice of tax law in the United States. .

“It is not right for very successful companies to avoid paying their fair share to support the expenditures we need to invest in our economy, our workforce, R&D. and a working social safety net,” said Ms. Yellen.

Still, resistance from corporate America is mounting, and business groups are warning that the prospect of a $2 trillion increase in corporate taxes will make American companies less competitive around the world. With rising prices continuing to be a concern among policymakers in the US, business interests said tax increases could drive inflation as companies pass them on to consumers.

Ms Yellen dismissed this theory, arguing that most economic research has found that corporate tax increases mostly fall on past investments and will not hurt workers or cause prices to rise faster.

“There is no reason to think that changing the corporate tax would have a direct impact on prices,” Ms Yellen said.

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