OECD Reaches Agreement on DST, but Republicans in Congress Cry Foul
The Organization for Economic Cooperation and Development announced Oct. 8 that it has reached an agreement on a global minimum tax, and a way for countries whose residents access digital services to collect taxes from the companies that provide those services, even if those companies have no local physical presence. These are known as Pillar One and Pillar Two in the OECD.
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The agreement says no new digital services taxes may be imposed from here on, assuming the agreement comes into force by the end of 2023. For existing DSTs, it says their removal "will be appropriately coordinated."
The Office of the U.S. Trade Representative had threatened to levy tariffs on imports from six countries with DSTs, but held off as negotiations continued (see 2106020047).
But for the agreement to come into force, countries have to pass tax treaties, and in the U.S., that requires a two-thirds vote in the Senate. Treasury Secretary Janet Yellen has testified that there are other ways to make the changes to domestic law that would allow the U.S. to comply. But Senate Finance Committee ranking Republican Mike Crapo, Foreign Relations Committee ranking member Jim Risch and Banking Committee ranking member Pat Toomey disagree, and sent her a letter saying so. "The lack of consultation, in addition to these latest statements, calls into question how serious Treasury is in achieving bipartisan consensus on any Pillar One agreement," they wrote. "Further, Treasury’s continued use of the negotiations to advance the Administration’s tax agenda on Pillar Two, at the expense of ceding substantial U.S. taxing rights to a global rulemaking body without seeking constitutionally mandated approval, puts the durability of any agreement at significant risk."