According to Law360, U.S. Treasury Secretary Janet Yellen told the House Ways and Means Committee on Wednesday that the OECD's global tax deal would reduce some of the tax burden on the country's workers and place it on corporations.
The OECD's tax overhaul is in the country's best interest, Yellen told lawmakers during a committee hearing, adding that the share of the U.S. tax burden borne by corporations has diminished significantly over time considering the size of the economy.
"I'm very encouraged that most major economies are moving forward and adopting it," Yellen said, adding she thinks that Poland will soon decide that it's in its interest and that the European Union will adopt it soon. Poland is the lone holdout in the EU.
All but a handful of countries in the OECD's inclusive framework of 141 jurisdictions agreed to the global tax overhaul in October, which included the 15% minimum tax rules under Pillar Two for large multinational corporations and a reallocation of taxing rights on highly profitable companies under Pillar One.
"For the United States, this will level the playing field," Yellen said, noting that the U.S. is the only country in the world to currently impose a minimum tax on the foreign income of multinational corporations.
They Will Move From 0 To 15%."
Rep. Lloyd Doggett, D-Texas, said the global minimum tax would end some of the distortion in the current tax system that favors those who dodge their taxes versus domestic businesses that are paying their fair share, and would remove the incentive to export American jobs. A global minimum tax would additionally help multinational companies because of the way their international competitors would be taxed, Doggett said.
Under Pillar One, taxing rights would be reallocated to jurisdictions where highly profitable multinationals have customers but lack the physical presence required to be taxed under current nexus rules.
Rep. Kevin Brady of Texas, the Ways and Means Committee's top Republican, said that under the agreement, companies such as Boeing and Caterpillar would bear the brunt of the revenue redistribution because 60% of the revenues for redistribution would come from U.S-based companies. Meanwhile, foreign competitors such as Europe-based Airbus and Volvo would bear less of the deal's financial burden, Brady said.
Yellen Also Defended President Joe Biden's Internal Revenue Service Funding Request During The Hearing,
Telling Lawmakers The IRS Needs The $80 Billion
To Expand Its Enforcement Activities.
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(Lots of Luck with that, as there does not appear to be
any realistic possibility of that happening with this Senate)
"Tax compliance, in effect, is voluntary and this proposal will address that," Yellen said. The proposal would improve the experience of all taxpayers by ensuring customer service representatives are available to answer calls and taxpayers have access to tax credits, refunds and other benefits they're entitled to, she said.
The proposal would additionally provide resources to hire more employees, Yellen said.
"That's critical to addressing this issue,'' she said, "ensuring that the IRS has the workforce and the technologies it needs to best serve taxpayers."
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