French tax

US Treasury’s Yellen to Push Poland to Implement Global Minimum Tax

Treasury Secretary Janet Yellen testifies at the Senate Banking, Housing, and Urban Affairs Committee hearing entitled “Financial Stability Oversight Board Annual Report to Congress,” in the Senate Office Building Dirksen in Washington, DC, U.S., May 10, 2022. Tom Williams/Pool via REUTERS

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WARSAW, May 16 (Reuters) – U.S. Treasury Secretary Janet Yellen will thank Poland for taking in millions of Ukrainian war refugees on Monday, but she has another goal for the meetings in Warsaw: to persuade Polish leaders to support the project to implement a global minimum of 15% for companies. tax.

Poland is alone in resisting the European Union’s implementation plan, having vetoed a compromise in April to kick off the 137-nation deal struck last October aimed at ending a competitive spiral in the lower corporate tax rates. Read more .

Poland’s new finance minister, Magdalena Rzeczkowska, has called for a “legally binding” link between the global minimum tax and the other pillar of the tax negotiations – a reallocation of certain taxing rights for large, highly profitable multinationals to ” market country” where their services and products are sold.

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For some countries participating in the Organization for Economic Co-operation and Development negotiations, this so-called “pillar 1” plan is the most desired global tax change, allowing them to collect revenue from large American technology giants such as the owner of Google Alphabet (GOOGL.O), the owner of Facebook Meta (FB.O), Amazon.com (AMZN.O) and Apple (AAPL.O).

But the reallocation pillar was not part of the October deal and is not fully developed. This more complex plan requires changes to international tax treaties, and Rzeczkowska has expressed concerns that if it fails, the global minimum tax would impose excessive burdens on European businesses.

French Finance Minister Bruno Le Maire, the current chair of EU finance ministers, has expressed skepticism about the arguments amid ongoing legal disputes between Poland and the EU.

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Yellen is due to meet Rzeczkowska, Polish Prime Minister Mateusz Morawiecki and central bank governor Adam Glapinski. She is also to visit a World Central Kitchen facility providing meals to Ukrainian refugees and a museum of Jewish history.

A person familiar with OECD tax negotiations told Reuters that Yellen is expected to highlight the benefits for Poland of adopting the global minimum tax, namely an estimated annual income of $2 billion, which could help cover the high costs of hosting Ukrainian refugees.

“It is important to note that these revenues are going to be paid by large multinationals, not by individuals or small Polish companies,” said the source, who was not authorized to speak publicly on the issue and declined to comment. to be named. “It will shift investment from countries that are traditional tax havens to countries like Poland that can be competitive based on their labor force and economic fundamentals.”

The US Treasury declined to comment on Yellen’s specific messages, but said she would discuss the global minimum tax agreement at meetings in Poland.

Yellen will also need to reassure Polish officials about growing uncertainties over the U.S. implementation of the global minimum tax, said Manal Corwin, head of KPMG’s domestic tax practice in Washington and a former U.S. Treasury official.

The US Congress must approve changes to the current 10.5% US global minimum tax known as “GILTI”, raising the rate to 15% and converting it to a country-by-country system.

The changes were originally included in US President Joe Biden’s sweeping social and climate spending bill, which was stalled last year after objections from centrist Democrats in the Senate.

Prospects for a lean spending package with the tax changes look increasingly difficult as the midterm congressional elections approach and lawmakers raise concerns about increased spending amid a growing economic crisis. high inflation.

But Corwin said the lack of implementation by the United States is unlikely to prevent the other 136 countries from suing, especially if Poland can be brought into the EU’s implementation.

“If the EU directive is successful, I think the rest of the world will move on with or without the US changes,” Corwin said. “So I feel like it’s not as much of a concern for countries as it might have been before.”

Tax experts say the EU’s implementation would ultimately pressure the US to adopt the changes, as some taxes paid by US multinationals under the system would go to foreign jurisdictions rather than to the US Treasury.

Yellen, who overturned the Trump administration’s past objections to a global taxing rights deal, successfully persuaded holdouts to accept it. This includes Ireland, which has agreed to raise its current corporate tax rate of 12.5% ​​to a minimum of 15%.

“Anywhere she has spoken and lobbied about it, including Ireland, she’s managed to win, so I wouldn’t bet against her on the tax deal,” said Josh Lipsky, director of the GeoEconomics Center at the University. ‘Atlantic Council.

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Reporting by David Lawder; Editing by Aurora Ellis

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