Congressional Republicans Question International Tax Strategy
The top Republican on the Senate Finance Committee and the presumed front-runner for chairman of the House Ways and Means Committee, along with 30 other Republicans on the committees, told Treasury Secretary Janet Yellen that her strategy to tax multinationals -- and in the process, convince countries to abandon digital services taxes -- will not be accepted in Congress.
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"While some may believe that implementation by foreign countries of the model rules ... will lead the United States to follow suit, Congress’s hand will not be forced. Nor will Congress sit idly by as U.S. companies and profits are taxed in a manner inconsistent with U.S. law and our bilateral tax treaties," they wrote Dec. 14. "This should have been clear to both the Administration and its international negotiating partners before, but it should be even more apparent now with the incoming divided government in the United States. Prioritizing U.S. interests must include defending U.S. taxing rights and business interests consistent with our bilateral tax treaties."
They wrote, "As you are aware, the Administration cannot unilaterally override U.S. tax treaties by political agreement."
They concluded, "Just two years ago, there was clear, bipartisan agreement on the primary U.S. objective in negotiating an OECD agreement: to put an end to foreign countries’ extraterritorial taxation of U.S. companies in the form of digital services taxes. Today, foreign countries continue to threaten extraterritorial taxes on U.S. companies, but they do so at the Treasury Department’s invitation pursuant to the undertaxed profit rules." Instead, the members wrote, the administration should work with both parties in Congress "to defend the United States’ interests."
Senate Finance Committee Chairman Ron Wyden, D-Ore., said, by contrast, "Congress must align our system with these new norms to prevent countries like China from using their tax systems to undermine the United States and to ensure American businesses and workers can compete on a level-playing field with our global competitors. If opponents continue to put their heads in the sand, it will only hurt American interests in the long run.”