OECD chief sees global deal on digital tax postponed to 2024

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The deal, which the OECD hoped to sign by mid-year, would give other countries a larger share of the tax levies on the profits of major U.S. digital groups like Apple Inc and Alphabet Inc.’s Google.

This is the first of two pillars of the largest overhaul of cross-border tax rules in a generation. Both pillars were originally supposed to be in place in 2023. The review also includes plans for a minimum global corporation tax of 15% for large multinationals.

OECD Secretary General Mathias Cormann told a panel at the World Economic Forum in Davos, Switzerland, that progress in defining the technical details of the digital tax deal is proceeding slower than expected.

“At first we deliberately set a very ambitious implementation agenda to keep the pressure on … but I suspect we are likely more likely to achieve practical implementation by 2024,” he said.

Meanwhile, the Biden administration and the European Union are struggling to pass legislation implementing the global minimum tax agreement agreed last October by nearly 140 countries.

Cormann said it was “clearly” in the interest of the United States to join the agreement and said he was “quietly optimistic” about presenting a compromise within the EU that all members could support.

French Finance Minister Bruno Le Maire, whose country holds the rotating presidency of the European Union until the end of June, said on Tuesday he was confident EU finance ministers will unanimously support the global minimum tax. next month.

EU approval was delayed by objections from Poland, which vetoed a compromise in April to initiate the deal with 137 countries within the EU.

U.S. approval, meanwhile, has been blocked in Congress, and Cormann has been asked whether U.S. ratification prospects would be disappointed if Republicans, who largely oppose the deal, gain a majority in the House of representatives and the Senate in the November mid-term elections.

The deal could be implemented by other countries even if US lawmakers refused to sign it, and Cormann said it would be to the detriment of US multinationals.

“I can’t imagine a country … making a decision that would put it at such a disadvantage,” Cormann said. “I believe that regardless of the majority in Congress … it is clearly in the interest of the United States.”

Congress is expected to approve changes to the current US global minimum foreign tax of 10.5%, known as “GILTI,” by raising the rate to 15% and converting it to a country-by-country system.

The changes were originally included in US President Joe Biden’s social and climate bill, which was blocked last year following objections from center Democrats in the Senate.

But the outlook for a leaner spending package with tax changes looks increasingly dim as mid-term congressional elections approach and as lawmakers express concerns about increased spending amid an economic downturn.

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