Insights from Washington: The Wait Continues and Other News
As negotiations continue on the budget reconciliation package, it appears more and more likely that progressives in Congress will need to scale back President Biden’s original economic agenda. One way Democrats are considering lowering the cost of the package is to enact income eligibility limitations on some of the programs. As previously mentioned, as the spending components of the bill are lowered, we expect the tax increases to also decrease. We don’t expect to have clarity on the changes to the tax proposals until the top-line number of the legislation is agreed to within the Democratic party. Neither the House nor Senate are in session this week, so there will be little clarity on where this is heading until next week.
International Tax News
In other news, 136 of 140 member countries of the Organization for Economic Cooperation and Development (OECD) have agreed to a global minimum tax rate and an end to new digital taxes proposed and/or enacted by certain countries. The deal includes a 15% minimum rate for corporations to be imposed by 2023. The agreement sets rules limiting the “race to the bottom” on tax rates. The global tax floor will only apply to firms with annual revenue of €750 million or more and is aimed at technology giants such as Amazon, Facebook, Apple and Google. The agreement will ensure a fairer distribution of profits and taxing rights. It requires the largest multinational enterprises to reallocate some tax rights from their home countries to the markets where they have business activities and earn profits, regardless of their physical presence there. A ten-year phase-in period is included for certain aspects of the agreement.
The OECD announced they plan to have model rules for the minimum tax next month. Work will still need to be done, as each country will need to draft and pass legislation to enact these rules. As we are experiencing with the current negotiations in Congress, this may not be an easy task in the United States.
We will continue to provide updates as the news progresses. If you have any questions, please contact us.