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ICYMI: EU Failed to Reach Agreement on Global Minimum Tax Proposal

PACE Coalition Calls Failure ‘Further Evidence’ that Congress Should Not Make Major Changes to International Tax Code

Washington – In case you missed it, earlier this week finance ministers of European Union member states failed to agree on the timing for implementation of its global minimum tax proposal.

PACE Perspective:

“PACE opposes harmful changes to America’s GILTI provision that would make the United States less competitive and disadvantage American businesses and workers. The European Union’s failure to agree on the timing to implement the OECD’s global minimum tax is further evidence that Congress should not make major changes to our international corporate tax code unless and until our foreign competitors do. That means foregoing consideration of the GILTI changes in the House-passed Build Back Better Act. Doing so before the rest of the world acts would not level the playing field; instead, U.S. businesses and the millions of Americans they employ would be at a serious competitive disadvantage at a time when both are facing historically high inflation, among other challenges.”

Letter to Members of Congress

December 17, 2021

Dear Member of Congress: 

We write today as members of the PACE Coalition, a broad-based organization dedicated to  promoting U.S. job growth and a strong U.S. economy through policies that support the  global competitiveness of American workers and American businesses. As the Senate  begins to consider H.R. 5376, the Build Back Better Act, PACE strongly urges you to reject  international tax proposals that would severely harm U.S. competitiveness.  

The House-passed version of H.R. 5376 would further tilt the playing field against American  businesses by imposing significantly higher taxes under the Global Intangible Low-Taxed  Income (GILTI) provision. The United States is already the only country in the world that  imposes a minimum tax on the active income that its companies earn abroad. Increasing  the GILTI tax burden – before any other country has taken even preliminary steps to adopt  their own foreign minimum tax – would significantly diminish the ability of American  companies to compete in global markets and decrease the demand for goods and services  produced by American companies and their American workers.  

Congress should prevent a loss in American jobs caused by the unilateral adoption of higher  taxes only on American companies. While many countries have endorsed the OECD  statement on voluntary implementation of foreign minimum taxes, no other country in the  world has yet adopted a foreign minimum tax. Further, an endorsement of the OECD  statement does not require any country to adopt a foreign minimum tax of their own.  

OECD final guidelines on a foreign minimum tax have been repeatedly delayed and there  are no signs that other countries, including China, are planning to enact a foreign minimum  tax in the next several years. Further, even if every country moved to adoption  immediately, the House-passed bill would still impose a more restrictive foreign minimum  tax on American companies than the foreign minimum tax outlined by the OECD. 

Unless and until other countries implement their own foreign minimum taxes, there should  be no increases in GILTI taxes on the foreign earnings of American companies. Likewise,  the present-law tax rate on foreign-derived intangible income (FDII) should also be  maintained to be in parity with the GILTI tax rate and continue its important role in  incentivizing U.S. development and ownership of intellectual property.  

Sincerely, 

Alliance for Competitive Taxation (ACT) 

American Beverage Association 

American Chemistry Council

American Petroleum Institute 

Business Roundtable 

Council of Insurance Agents and Brokers 

Energy Workforce & Technology Council  

Glass Packaging Institute  

Illinois Manufacturers’ Association 

Indiana Manufacturers Association  

National Association of Manufacturers  

National Foreign Trade Council  

State Business Executives  

U.S. Chamber of Commerce 

United States Council for International Business

PACE Coalition on OECD Global Tax Framework: Far from Finished

Washington – The PACE Coalition today issued the following statement after the Organisation for Economic Co-operation and Development (OECD) announcement on a global tax framework:

“Today’s OECD announcement on progress for a global tax framework leaves many details unresolved and questions unanswered. It also raises significant concerns on why Congress would increase the GILTI rate above the OECD’s proposed 15%, and do so years before other countries can implement this agreement. Congress should not make changes to the tax code unless and until other countries enact foreign minimum taxes on their companies. Doing so would further disadvantage U.S. companies and American workers.”

PACE Coalition Urges Congress to Reverse Course on Harmful Tax Changes

Washington – The PACE— Promote America’s Competitive Economy—Coalition today issued the following statement in advance of the Ways and Means markup of Reconciliation legislation:

“PACE opposes proposed international tax increases that further tilt the playing field against American companies, jeopardize American job growth and make the United States less competitive with China and others.

“Globally engaged American companies open up the world for American workers to sell the goods and services they produce. These American companies directly employed 26.6 million American workers in 2018, and support tens of millions of additional American jobs through their supply chains. Over half of all goods and services that are exported from the United States are by globally engaged American companies or are purchased by them from other American companies.  American companies compete head-to-head against foreign-headquartered companies around the world, with 90% of the goods and services produced by their foreign affiliates sold to foreign customers.

“The current tax law’s Global Intangible Low Tax Income (GILTI) provision already results in American companies paying additional tax on their foreign earnings not faced by their foreign competitors. Any further increases of taxes paid only by American companies will put them at a greater disadvantage globally and put American jobs at risk.

“Bottom line, the United States is the only country with a global minimum tax. Before Congress considers making the current U.S. system even more burdensome for American companies, it needs to ensure other countries enact their own foreign minimum taxes on their own companies. Doing otherwise simply disadvantages American companies and American workers.  

“Competitive tax policies benefit all Americans—increasing jobs and household incomes. PACE urges Congress to reverse course on plans to impose these harmful tax changes.”

PACE on International Tax Discussion Draft Introduced by Senators Wyden, Brown, Warner

Washington – The PACE Coalition today issued the following statement in response to the introduction of the Overhauling International Taxation discussion draft by Senate Finance Committee Chair Ron Wyden, Senator Sherrod Brown and Senator Mark Warner:

“This discussion draft would increase taxes on American companies and not their competitors, which would tilt the playing field against our companies, jeopardize American job growth and make the United States less competitive with China and others.

“The current tax law’s Global Intangible Low Tax Income (GILTI) provision already punishes companies that shift operations from the United States to lower-tax jurisdictions. In fact, recent analyses show that GILTI has actually caused U.S. companies to bring more income and operations back to America. Any further increases of taxes paid only by American companies will put them at a greater disadvantage globally—including against Chinese state-owned enterprises. Bottom line, the United States is the only developed country with a global minimum tax; Congress needs to wait for other countries to enact foreign minimum taxes before making the current U.S. system even more burdensome for U.S. companies and disadvantaging our businesses at home and in a global economy.  

“Competitive tax policies benefit all Americans—increasing jobs and household incomes. PACE urges Congress and the Biden Administration to reverse course on plans to impose these harmful tax changes.”

PACE Coalition Statement on Global Minimum Tax Agreement

Washington - The PACE Coalition today released the following statement on the announced OECD high-level agreement on a 15 percent global minimum tax:

“U.S. companies have been subject to a minimum tax on their overseas earnings since the U.S. undertook tax reform in 2017, and the OECD announcement holds the potential for foreign competitors to be held to a similar standard. However, until there is widespread adoption of such foreign minimum taxes, American businesses serving the global marketplace will continue to be at a competitive disadvantage.

“Congress should wait for other countries to enact foreign minimum taxes on their companies before making changes to the tax code that would further disadvantage U.S. companies and American workers. America’s globally engaged companies will continue to face steep challenges in competing against foreign competitors who may not be subjected to a global minimum tax for years—if ever.

“We urge U.S. leaders to maintain a competitive U.S. tax code, which will foster a stronger economic recovery from the pandemic, job and wage growth for American workers and enduring economic prosperity for American families nationwide."

The PACE Coalition is dedicated to a robust economic recovery and long-term prosperity for all Americans. Learn more at http://KeepPACE.us and @KeepPaceUS

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