Treasury Fends Off GOP Queries on Unfinished Global Tax Deal

(Bloomberg) -- The Treasury has sought to reassure a group of Republican senators the global tax agreement it struck in 2021 with nearly 140 countries will have a negligible impact on U.S. tax revenue, while stopping short of addressing a raft of GOP questions and concerns about the deal, which has yet to be finalized.

In a letter dated March 1 obtained by Bloomberg News, the Treasury’s assistant secretary for legislative affairs, Jonathan Davidson, said many questions put by a group of Republican lawmakers to Treasury Secretary Janet Yellen couldn’t yet be answered because of ongoing negotiations over the details of the agreement.

The Republicans, led by Senator Mike Crapo of Idaho, sent questions about the deal to Yellen in a Dec. 22 letter.

“We continue to believe that any U.S. revenue impact would be relatively small to non-existent,” Davidson wrote. But “important design elements remain open in the negotiations, and it is premature to provide a precise impact assessment,” he added.

The letter didn’t answer Crapo on how many U.S.-based companies would be affected directly by the reallocation of tax rights envisioned in the agreement, or what would happen if the deal wasn’t in place by the end of next year. Davidson also wasn’t specific on how the administration intended to secure Congress’s approval of the pact.

Distance Illustrated

In making clear how many details remain unresolved, the letter illustrates the distance from the global tax agreement’s implementation -- despite the fanfare that accompanied its announcement at last October’s summit of Group of 20 leaders in Rome.

The agreement, sought for almost a decade through negotiations sponsored by the Organization for Economic Cooperation and Development in Paris, would transform the way countries agree to tax multinational companies -- if it comes to life.

It seeks to halt the flight of corporations to tax havens by introducing a 15% global minimum tax and to settle growing disputes over how to tax cross-border digital commerce by reallocating some taxing rights based on where firms generate revenue.

Both components will require some form of Congressional assent. Republicans have ranged from skeptical to opposing the deal outright.

In his Dec. 22 letter, Crapo accused the Biden administration of rushing into an agreement that may put U.S. businesses at risk without properly consulting Congress.

Davidson said the precise answers would come only after technical talks were completed, including negotiations over revenue sourcing and methods for eliminating double taxation.

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