Republican Senators Question DST Solution and Tax Agreement
All the Republican members of the Senate Finance Committee, led by ranking member Mike Crapo of Idaho, are questioning the administration's decision to trade off extraterritorial taxation of U.S.-headquartered companies (Pillar One) in exchange for a global minimum corporate income tax (Pillar Two) and the removal of digital services taxes.
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Their Dec. 22 letter notes that the U.S. has paused all its retaliatory tariffs for other countries' DSTs, even as the DSTs haven't yet been rolled back. Those DSTs are supposed to be removed at the end of 2023, once countries have passed legislation to raise their corporate income tax rates and make the other changes agreed to in the G-20 and the Organization for Economic Cooperation and Development.
"Given the number of open issues remaining and the need for all countries to achieve consensus, implementation by 2023 is likely unachievable. These agreements appear to eliminate any U.S. leverage, while attempting to manipulate Congress to act -- potentially to the detriment of U.S. businesses and revenue -- in order for DST relief to be achieved," the senators wrote.
They said bipartisan action to implement the plan in Congress is impossible without more communication from the Treasury Department. To that end, they asked the administration to provide its estimate of how many U.S. companies would be subject to the new extraterritorial taxation.
"While we understand there are open design issues, Treasury has clearly performed an analysis and identified a range of possible outcomes. Please provide point estimates of the following, and describe the key design issues on which these estimates depend: a. The amount of profit that would be reallocated between the United States and foreign countries, including a breakdown of estimated amounts by country. b. The net revenue impact of Pillar One to the United States."
They also asked: "If Pillar One is not implemented by December 31, 2023, will U.S. companies have any recourse for DSTs collected between now and that date? Will other countries be free to enact DSTs at that time?"