By Doug Connolly, MNE Tax
In a September 9 virtual meeting, US Treasury Secretary Janet Yellen told the G7 finance ministers that the Biden Administration is “pleased with the progress the U.S. Congress is making” on moving the President’s proposed US international tax reforms. She also stressed to the foreign leaders the importance that the legislation enact “a U.S. minimum tax rate on foreign earnings of at least 21 percent.”
Congressional Democrats are looking to pass Biden’s international tax reform plan through a partisan reconciliation bill this fall. The markup of that legislation began today in the House of Representatives.
Biden proposed the 21% rate for the US global intangible low-taxed income (GILTI) provision earlier this year. Many congressional Democrats continue to support the plan.
A 21% rate would generally double the current effective GILTI rate of 10.5% and land the US at a minimum tax six percentage points higher than the 15% global minimum tax agreed to in principle by 130+ nations. Nonetheless, Democratic advocates of the plan contend the two-pronged domestic and global tax reform plan will leave US corporations more competitive than before.
Yellen further suggested that the US minimum tax should be “on a per-country basis.” US GILTI currently allows blending income from high and low-tax jurisdictions, diluting its applicability to profits that multinationals report in low-tax jurisdictions.
Both the Biden plan and global plan propose country-by-country calculation for the minimum tax to give the provision more teeth. However, a recent Senate proposal would adopt a modified country-by-country calculation, allowing for an exclusion for income from high-tax countries.
Doug Connolly
Doug Connolly is Editor-in-Chief of MNE Tax. He has more than 10 years of experience covering tax legal developments, previously working with both a Big Four firm and a leading legal publisher. He holds a law degree from American University Washington College of Law.
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