Itai Grinberg and Rebecca Kysar, the Treasury officials who led global negotiations for the United States, argued in a trial last week that with a rate of 21%, “jobs and investments can thrive in the United States”.
After a virtual meeting with her Group of 7 nations counterparts last week, Treasury Secretary Janet L. Yellen said the higher rate “would generate funding for a sustained increase in critical investments in education, research and clean energy”.
More details on those plans are expected to be released in early and mid-October. However, it is unclear exactly how and when the United States would adopt this part of the agreement, known as Pillar 1, and business groups and Republicans fear that American companies will bear the brunt of new taxes.
The October deadline is self-imposed and could be pushed back. The countries have set a goal to fully activate the agreement by 2023, as it will take time for countries to change their tax laws.
The House proposal, presented by Democrats in the Ways and Means Committee, could still undergo substantial changes before a final vote. Ultimately, it will have to be merged with a proposal from Senate Democrats, who have yet to agree on a tax rate for foreign corporate profits.
Manal Corwin, an Obama administration treasury official who now leads the Washington domestic tax practice at KPMG, said it was possible the rate could rise further despite the corporate pullback.
“You never know how these things turn out when they need more income,” Ms Corwin said.
Any change could come with adjustments to House Democrats’ proposal for national corporate tax rates. Despite Mr. Biden’s call for 28%, the House has proposed a graduated structure, ranging from 18% for the smallest businesses, with revenue under $400,000, to 26.5% for businesses with revenue taxable is over $5 million.