In Germany, Ways & Means Members Highlight How OECD Global Tax Deal Harms Jobs, Emboldens China, and Would Spark Global Tax Instability.
BERLIN – Top German finance officials met with Ways and Means Chairman Jason Smith (MO-08) and Committee members to discuss Americans’ deep concerns with the global tax surrender negotiated by President Biden at the Organization for Economic Development and Cooperation on Monday.
The bilateral meetings were with German Finance Minister Christian Lindner, Federal Minister for Special Affairs of the Chancellery Wolfgang Schmidt, and Chairman Alois Rainer and members of the German Bundestag’s Finance Committee.
During these meetings, Members made clear that the OECD’s proposed global tax deal would give foreign competitors like China an economic advantage because they would never fully comply with the agreement. Meanwhile, the United States would surrender over $120 billion of tax revenue over the next decade. Given the Biden Administration’s lack of constitutional authority to write U.S. tax laws, Members explained that Congress would not pass into law any OECD tax deal that permits foreign countries to impose unfair taxes on American workers and make the United States less competitive in the global economy.
Chairman Smith also reiterated Republican opposition to the UTPR surtax in Pillar 2 that would uniquely hurt innovative American businesses. Foreign countries should never be allowed to unfairly tax the domestic operations of American businesses.
Below are excerpts of Ways and Means Members’ comments during the meeting:
Chairman Smith: “As Chairman of this Committee, the tax-writing committee, I will never allow the current version of the OECD global minimum tax to ever become law in the United States. The last thing we want is instability in the global economy. But if this global minimum tax starts being passed in other countries, it’s going to create great instability, at least with the United States, because our committee will move forward with Tax and Trade mechanisms to make sure that we are making whole our companies that are being targeted by other countries. Which means this tax is creating exactly what it’s supposed to be preventing. That’s why we’re trying to get this fixed before it’s too late. That’s why we felt that it was very important for this Committee to visit with you so you could hear from us. Our White House may be saying one thing, but they can’t pass it.”
Rep. Ron Estes (KS-04): “Our concern in particular is the way that this deal’s been structured – it’s really taking money away from the U.S. Treasury, taking money away from U.S. businesses, and our workforce. And while we have seen the success of a minimum tax in the United States, we do have a big concern about trying to make it a one-size-fits-all tax, recognizing that there are differences between countries. We want to make sure there’s something that’s implemented that is fair to all.”
Rep. Kevin Hern (OK-01): “When it comes to taxation we have a Joint Committee on Taxation. It’s very well respected, been around for decades. And their best-case scenario is this costs us $60 billion a year in taxation. Worst case is $120 billion. But in fact, the real best-case scenario is actually if we implemented Pillar 2 and nobody else did, we make $250 billion. And that’s not going to happen. So it is important that everybody understands their respective responsibilities. We respect yours. Ours is to protect and guard the American taxpayer dollar.”
Rep. Carol Miller (WV-01): “I am a small business owner. And as a business owner, I want fairness and I want stability. If we are making suggestions or rules of how things should be done in the world, how do you know if China’s gonna play by the rules? Because they don’t. And so it’s important to me that we are all on the same page together as we deal with this huge country that would really like to gobble all of us up.”
Rep. Greg Murphy (NC-03): “In the pandemic we saw our supply lines, especially medical, being so terribly exposed and we saw how dependent we are on China. If we’re going to establish a global minimum tax upon the world, we’re also in a time where we’re trying to push our supply lines away from China. So, not only are we talking about sending anywhere from $60 billion to $120 billion American dollars to other countries under Pillar 2, we also have to diversify our supply lines. We need some incentives to do that here and in other countries.”
Rep. Michelle Steel (CA-45): “Many of the large companies in my state are concerned about double taxation – possibly even triple taxation. And then there’s the question of whether other countries will be accountable. Even as you import a lot of EVs from China, can you trust them? There’s no transparency. Their goal is stealing, and they are able to steal intellectual property while hiding their tax liabilities. American companies could be double taxed, while others do not pay their fair share.”
Rep. Nicole Malliotakis (NY-11): “The way the rules are written currently by the OECD, it would actually give preference to Communist countries like China that do these state subsidies, these direct payments. And that is a concern, because in the United States, we have non-refundable tax credits, and this would actually put us at a disadvantage, because payments that China makes would not be calculated toward the effective tax rate, in the way that our non-refundable tax credit for let’s say, research and development, would.”
On “Section 49” of the German Income Tax Act, which imposes a withholding tax on royalty payments for patents and trademarks registered in Germany.
Rep. Randy Feenstra (IA-04): “I’d like to talk about Section 49 of the German Income Tax Act the subject of a recent letter I sent to Finance Minister Lindner. American companies are particularly concerned with how Germany is pursuing taxation of royalties by non-German entities – we’re really concerned about it, and it creates an unfair playing field in the global market, particularly if this tax is retroactive. German advisers have informed our companies that they would like voluntary disclosure of some of their proprietary information – so we need to know more about where your government is going with this. This is very significant overreach. And we humbly ask as that you look at repealing this provision as it creates a significant hardship on us collaboratively working together, and our companies.”
Congressman Jason Smith (Missouri), Chair of Ways and Means Committee
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