By Julie Martin, Editor, MNE Tax
It is unknown whether the proposed update the international system for taxing multinationals, advanced by the OECD, will benefit or harm US interests, senior staff to Congress’ tax-writing committees said at a Tax Council Policy Institue conference, held in Washington DC.
The tax staff members also emphasized the need for US businesses to express their views about the “pillar one” and “pillar two” international tax reform to members of Congress.
Speaking February 14, Beth Bell, Democratic Tax Counsel for the US House Ways and Means Committee, said that House members consider the international tax reform’s effect on the US tax base to be a “very determinative factor” in whether they will support or oppose the proposal.
Conclusions about the tax reform are very difficult to reach, though, Bell said, because many elements of the proposal’s design are not yet agreed to by countries, including the pillar one, amount A, formula and thresholds. For pillar two, important unresolved issues include whether countries will agree to grandfather the US’s GILTI regime or not, she said.
Similarly, Mark Warren, Republican Chief Tax Counsel at the Senate Finance Committee, said the lack of key assumptions makes it difficult for senators to assess whether the proposal is in the US interest or not. Warren said that any international tax deal must be good for US business, promote certainty, and not reduce tax revenue.
Both Warren and Bell said that while the OECD provided the US with data to assess the impact of the international tax reform proposals, the information provided may not be useful because it is old. The OECD provided 2016 data, Warren said, which predates the US’s Tax Cuts and Jobs Act and the full outcome of the OECD/G20 base erosion profit shifting (BEPS) plan.
Randy Gartin, Republican Chief Tax Counsel at US House of Representatives, Committee on Ways and Means, said the Joint Committee on Taxation (JCT) has yet to provide any data on the reform provisions and suggested it might be too early for the JCT to assist. “Usually, when I ask JCT for a score, they really want some specifics,” Gartin quipped.
Tiffany Smith, Democratic Chief Tax Counsel at the Senate Finance Committee, said that it is very important for stakeholders to not only talk to committee staff but to member offices. “They need to hear from companies so they are aware of what is going on and the impact,” Smith said.
Responding to questions by Tom Roesser, Senior Director, Tax Affairs, at Microsoft Corporation, Smith said that Congressional staff has worked on the international tax reform effort in both a bipartisan and bicameral manner. The staffs work together often, Smith said.
Warren agreed, stating that all seem to recognize the importance of presenting a unified US position in the global tax negotiations.
Gartin noted that implementing pillar one and pillar two in the US will likely require legislation. Amount A is a new taxing right. Moreover, the US effectively connected income rules and sourcing rules would need to change. Additionally, if the US GILTI regime is not grandfathered, legislation will be required, Gartin said.
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
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