Treasury Secretary Yellen seeks to get global tax deal back on track

Poland’s stance has been sharply criticized by European officials, particularly France, whose finance minister Bruno Le Maire has suggested that Warsaw is instead delaying a final deal in retaliation for a Europe-wide political dispute. Poland has threatened to veto measures requiring a unanimous EU vote because of an earlier decision by Brussels to block pandemic recovery funds for Poland.

The European Union had refused to disburse billions in aid to Poland since late last year, citing separate concerns about Warsaw’s interference in the independence of its judiciary. Last week, on the eve of Ms Yellen’s visit to Poland, the European Commission offered a last-ditch deal releasing €36 billion in pandemic recovery funds for Poland, which pledged to meet certain milestones such as judicial and economic reforms, in return for the money.

Negotiators around the world worked for months to work out the technical details of the deal, such as the types of income that would be subject to the new taxes and how the deal would be enforced. Failure to finalize the deal would likely mean a further proliferation of digital services taxes that European countries have imposed on US tech giants, much to the dismay of those companies and the Biden administration, which has threatened to impose tariffs on nations that adopt their own levies.

“It’s fluid, it’s moving, it’s a moving target,” Pascal Saint-Amans, director of the Center for Tax Policy and Administration at the Organization for Economic Co-operation and Development, said of the negotiations during from the DC Bar’s annual tax conference this month. “There is an extremely ambitious timetable.”

Countries like Ireland, with a historically low corporate tax rate, have been reluctant to raise their rates unless others follow suit. It was therefore important to ensure that there was a common understanding of the new tax rules to avoid opening the door to new loopholes.

“The idea of ​​multiple countries having the same rules in place is a new tax concept,” said Barbara Angus, head of global tax policy at Ernst & Young and former chief tax adviser to the House Ways and Means Committee. She added that it is important to have a multilateral forum so that countries can agree on how to interpret and apply the levies.

Yet as Ms Yellen pushes foreign countries to adopt the tax deal, it remains unclear whether the United States will be able to pass its own legislation to bring itself into compliance.

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