US Treasury’s Yellen urges Poland for global minimum tax

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Treasury Secretary Janet Yellen testifies at the Senate Banking, Housing, and Urban Affairs Committee hearing entitled “Financial Stability Oversight Board Annual Report to Congress,” in the Senate Office Building Dirksen in Washington, DC, U.S., May 10, 2022. Tom Williams/Pool via REUTERS

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WARSAW, May 16 (Reuters) – U.S. Treasury Secretary Janet Yellen on Monday thanked Polish leaders for taking in millions of Ukrainian war refugees, but urged them to support the European Union’s plan to put introduces a global minimum corporate tax of 15%.

Poland is alone in resisting the European Union’s implementation plan, having vetoed a compromise in April to kick off the 137-nation deal struck last October aimed at ending a competitive spiral in the lower corporate tax rates. Read more .

Poland’s new finance minister, Magdalena Rzeczkowska, has called for a “legally binding” link between the global minimum tax and the other pillar of the tax negotiations – a reallocation of certain taxing rights for large, highly profitable multinationals to ” market country” where their services and products are sold.

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For some countries participating in the Organization for Economic Co-operation and Development negotiations, this so-called Pillar 1 plan is the most desired global tax change, allowing them to collect revenue from large American tech giants such as the owner from Google Alphabet (GOOGL.O), the owner of Facebook Meta (FB.O), Amazon.com (AMZN.O) and Apple (AAPL.O).

But the reallocation pillar was not part of the October deal and is not fully developed. This more complex plan requires changes to international tax treaties, and Rzeczkowska has expressed concerns that if it fails, the global minimum tax would impose excessive burdens on European businesses.

French Finance Minister Bruno Le Maire, the current chairman of EU finance ministers, has expressed skepticism over the arguments amid legal disputes between Poland and the EU.

EXTRA INCOME

Yellen met with Polish Prime Minister Mateusz Morawiecki and was later scheduled to meet Rzeczkowska and central bank governor Adam Glapinski.

In a statement released by the US Treasury after Morawiecki’s meeting, Yellen stressed the need for Poland to move forward on the tax deal as it “will raise crucial revenue for the benefit of Polish and US citizens.” .

The EU Tax Observatory estimated that the tax would bring Poland 2 billion euros ($2.08 billion) in annual revenue, which could help defray the high costs of hosting Ukrainian refugees. .

“It is important to note that this income is going to be paid by large multinational companies, not by individuals or small Polish companies,” said a source close to the tax discussions, adding that this would allow Poland to be competitive. on the basis of its qualified and low-cost resources. labor and economic fundamentals. The source was not authorized to speak publicly about the matter and declined to be identified.

Yellen “expressed his gratitude for the generosity Poland has shown in hosting refugees” from Ukraine and discussed Europe’s energy situation and the screening of investments in Poland to protect national security, the official said. Treasure.

A statement from the Prime Minister’s Office makes no mention of the tax deal but focuses on coordinating international efforts to pressure Russia to end its war in Ukraine and reducing dependence on Russian energy.

“Poland will continue to call for further toughening of EU sanctions, especially in the energy, financial, transport and service sectors. To succeed in stopping the war machine, we need to reduce Russia’s economic and military potential as soon as possible.”

AMERICAN UNCERTAINTY

Yellen also needed to reassure Polish officials about growing uncertainties about the U.S. implementation of the global minimum tax, said Manal Corwin, head of KPMG’s domestic tax practice in Washington and a former U.S. Treasury official.

The US Congress must approve changes to the current 10.5% US global minimum tax known as “GILTI”, raising the rate to 15% and converting it to a country-by-country system.

The changes were originally included in US President Joe Biden’s sweeping social and climate spending bill, which was stalled last year after objections from centrist Democrats in the Senate.

Prospects for a lean spending package with the tax changes look increasingly difficult as the midterm congressional elections approach and lawmakers raise concerns about increased spending amid a growing economic crisis. high inflation.

But Corwin said the lack of implementation by the United States is unlikely to prevent the other 136 countries from suing, especially if Poland can be brought into the EU’s implementation.

“If the EU directive is successful, I think the rest of the world will move on with or without the US changes,” Corwin said. “So I feel like it’s not as much of a concern for countries as it might have been before.”

Tax experts say the EU’s implementation would ultimately pressure the US to adopt the changes, as some taxes paid by US multinationals under the system would go to foreign jurisdictions rather than to the US Treasury.

($1 = 0.9593 euros)

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Reporting by David Lawder; Editing by Aurora Ellis and Edmund Klamann

Our standards: The Thomson Reuters Trust Principles.


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