Yellen says US is not ready to sign global tax treaty just yet

LUXEMBOURG — The U.S. will not be ready by this year to add its signature to a treaty that’ll pave the way for a global levy on the world’s 100 richest companies that aims to prevent corporates from engaging in international tax tourism, U.S. Treasury Secretary Janet Yellen said Monday.

Under the proposed framework, known as Pillar One, the world’s biggest and most profitable companies would be taxed and countries would receive the proceeds based on where firms make money, as opposed to where they book their profits.

While “much of the treaty has been agreed to … there are some matters that are important to the United States and other countries that remain unresolved,” and these “need to be resolved before the treaty can be signed, so these processes will take into next year,” Yellen told reporters in Luxembourg, where she met with EU finance ministers.

Yellen’s comments are a blow to the Organization for Economic Cooperation and Development, which brokered the global tax deal and which is scrambling to secure enough signatures to back the levy by year-end.

For it to take effect, at least 30 countries that make up 60 percent of targeted global companies need to sign a multilateral treaty. The U.S.’s commitment is especially important as it is home to the world’s largest tech giants, the likes of Google, Meta, Amazon and Microsoft, which are a key target for the levy.

The U.S. will conduct a consultation on the multilateral treaty with all relevant stakeholders for two months, Yellen said. She added it is critically important for a treaty of “this level of importance and complexity” to be shown to the American public, and for Congress and the business community “to hear what their reactions are and to ensure that we have public support.”

But failing the year-end deadline could see governments across the world begin introducing national digital taxes against those tech companies, triggering retaliation from Washington and unleashing trade tensions.

The OECD brokered the ground-breaking reform, which was endorsed by over 138 countries, two years ago. The reform package proposes a minimum effective corporate tax rate of 15 percent, which the OECD has called on countries to implement from 2024. EU countries are due to pass national law to that effect by year’s end.

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