We have known this since the United States Senate refused, in 1920, to ratify the Treaty of Versailles and to join the League of Nations: when the country is in a phase of withdrawal, there is no point in conducting negotiations. multilateral if it requires going through the Congress box. The major OECD negotiations on the taxation of multinationals signed with great fanfare in October 2021 by 136 countries is no exception to the rule. There is no chance in a divided Congress that 67 out of 100 senators will ratify the deal, even if the November elections go heavily in favor of Democrats. Janet Yellen, Joe Biden’s Treasury Secretary, who pushed hard for this agreement, is preparing to abandon it. Recently, she mentioned a “red line” on the simplification of transfer pricing, a technical subject which makes it possible to define profits in each country but which will take years to resolve and amounts to renunciation.
The first pillar of the OECD agreement, which cannot come into force without the ratification of the United States, plans to impose a surcharge on multinationals, mainly in the digital and pharmaceutical sectors, making more than 10% profits and more than 20 billion dollars (19 billion euros) in turnover. This reform aims to tax companies also at the place of consumption. The idea was to prevent American giants from achieving considerable turnover outside the United States, particularly in Europe, but only paying taxes in the United States. This mechanism should have resulted in a distribution of between 130 billion and 360 billion dollars over ten years, according to OECD simulations.
The ratification of this first pillar has dragged on. Officially, the delay is explained by disagreements between India and the United States. In reality, congressional Republicans are blocking it. They denounce taxation of the intellectual property of their companies and note that their multinationals are already taxed through the VAT paid by consumers in Europe.
“Tax capitulation”
“We will not allow a bad deal negotiated by the Biden White House to allow foreign governments to steal American jobs, and we will not stand idly by while other countries use the global tax deal OECD to extract more than $120 billion in US tax revenue over the next decade », warned, in 2023, the Republican representative of Missouri, Jason Smith, president of the equivalent of the finance committee. Before the OECD in Paris, he denounced, in September, the “tax capitulation” of the Biden administration.
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