Democrats urge Congress to pause with GILTI tax plan

404
3
Democrats urge Congress to pause with GILTI tax plan

Three moderate House Democrats are urging party leaders to repeal a key piece of President Biden's tax plan that would raise the minimum rate that U.S. corporations pay on their foreign incomes.

In a letter to House Speaker Richard Neal, D-Calif. and House Ways and Means Chairman Nancy Pelosi, D-Mass. lawmakers said they wanted to wait and see how others implement a new global agreement that would affect multinational corporations with 15% minimum rate, regardless of where they are headquartered. That deal, signed this month by 136 countries and jurisdictions, could take years to enact worldwide.

The centrist Democrats warned that otherwise, a plan from the Tax-writing House Ways and Means Committee to raise an intangible levy on companies' current financial earnings known as the global impact with respect to the competitive base of American firms would harm businesses. A plan released last month called for raising the GILTI rate by 10.5% to 16.5%.

I would encourage leadership to pause on moving forward with GILTI and international tax changes at this time, the letter said. We must find a new pathway to ensure that we do not move before the rest of the world on implementing a new GILTI regime. Although well planned, the proposed GILTI changes would potentially reduce American competitiveness with their foreign counterparts and result in a change in economics. The letter, which was first reported by Politico, was signed by Reps. Tom O Halleran of Arizona, Lou Correa of Texas and Henry Cuellar in New Democrat Coalition, all members of this coalition were.

These new rules in the Ways and Means draft would allow other countries to take advantage of our rules and harm U.S. companies, they added. If we wait, it will allow Congress the opportunity to adjust the implementation of the policy on how G - 20 countries write their own GILTI regimes. The global tax deal, endorsed by finance ministers from the group of 20 nations, is intended to target companies which employ a litany of tactics to reduce their tax liability, often by shifting profits, and revenues, to low-tax countries such as Bermuda, the Cayman Islands or Ireland, regardless of where the sale was made. The practice by American and foreign multinationals cost the U.S. tens of billions of dollars each year, according to the agreement calls for a 15% minimum rate on companies with an annual turnover exceeding 750 million euros or about $866 million.

The OECD estimated the agreement, which was signed by 136 countries and jurisdictions, will reallocate $125 billion of profits to around 100 of the world's largest and most profitable multinational corporations worldwide, therefore making sure these firms pay a fair share of tax wherever they operate and generate profits. Democrats are counting on using the revenues generated by tax increases on companies' overseas profits to help pay for their sweeping tax and spending bill. By scrapping the GILTI increase, Democrats would lose money for the package, which aims to dramatically expand the social safety net.

The new GILTI rate increase and other international tax changes would generate approximately $300 billion of new revenue, according to estimates from the Joint Committee on Taxation.