The impact in the United States of the taxation of multinationals where their profits are made, and not in the country of their headquarters, a measure provided for in a global agreement signed in October, remains uncertain at this stage, the secretary said on Tuesday. US Treasury, Janet Yellen. “We will derive revenue from the taxation of foreign companies present in the United States (…). We will lose part of the revenue (…) reallocated to foreign countries”, she said during a hearing before the Senate Finance Committee. “In the end, it can be positive or negative, depending on details that have not yet been settled”said Joe Biden’s Minister of Economy and Finance.
Either way, she said, “the impact on tax revenue will be low”. At the beginning of October, 136 countries, including China and the United States, had managed to agree on a framework tax agreement, under the aegis of the Organization for Economic Co-operation and Development (OECD). This agreement includes two “pillars”. “Pillar 1”, the one referred to by Janet Yellen, consists in reallocating part of the tax on profits paid by multinationals to the countries in which they actually carry out their activities, and no longer only where their head offices are installed. “Pillar 2” corresponds to the establishment of a minimum effective tax rate of at least 15% on the profits of multinationals.
This one will have “significant impact” pointed out Janet Yellen. The agreement must now be adopted into the legislation of each of the signatory countries. Thus, in the United States, “ratification requires congressional approval”, underlined the minister. However, “the form this should take remains to be determined”, she said, questioned by a senator. Finally, “if China does not comply (with this agreement), then the United States and other countries in which Chinese companies do business, will be allowed to collect taxes from these Chinese companies on their activities outside the country. China”, she warned. The agreement is due to enter into force on December 31, 2023. Implementation was first envisaged on January 1, but was postponed to satisfy some countries who wanted more time.