One-Year Delay Could Sink Global Tax Deal As U.S., Other Countries May Back Out

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New York Times, A Global Deal to Tax Large Corporations Is Delayed a Year:

OECD TaxThe most ambitious tax overhaul in a century faced a new setback on Monday when the Organization for Economic Cooperation and Development, which is overseeing the global negotiations, said that proposed rules for how the world’s largest companies would be taxed would not be unveiled until the middle of next year.

The delay is expected to push enactment of the agreement, which had been intended by next year, to at least 2024. That will give negotiators more time to hash out a thicket of complicated details surrounding how to rewrite international tax treaties and enact a global minimum tax of 15 percent in more than 130 countries.

But it could also give governments more time to contemplate backing out of the pact as fears over inflation and a global recession intensify and as many countries, including the United States, undergo elections. …

The tax agreement, which was struck last October, is intended to increase taxes substantially on many large corporations and to end an international fight over how technology companies are taxed. Its architects said it would end the global “race to the bottom” for corporate tax rates.

The two-pronged approach entails countries enacting a 15 percent minimum tax so that companies pay a rate of at least that much on their global profits no matter where they set up shop. It would also allow governments to tax the world’s largest and most profitable firms by where their goods and services are sold instead of by where they are based. Both parts of the agreement have been stalled.

Wall Street Journal, Global Tax Talks Hit Another Delay:

The slower timeline adds to the political uncertainty in the U.S. For the global deal to take effect, U.S. lawmakers would need to approve any agreement reached by the Biden administration, but Congress might be under full or partial Republican control in 2023. …

Neither the U.S. nor the EU has passed legislation to implement the minimum tax. The U.S. effort is wrapped inside stalled Democratic fiscal legislation. The EU’s effort to implement the new tax by the start of 2024 has been stopped by Hungary’s veto. …

Negotiators fear the consequences of missing the new 2023 deadline. If talks stall again or it becomes clear that Congress won’t approve an international agreement, the result could be a global free-for-all, in which some governments impose novel, uncoordinated taxes and others respond with trade sanctions.

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