“For the United States, this will be a fundamental shift in how we choose to compete in the global economy,” Ms. Yellen said. “Not a competition based on the lowest tax rates, but rather on the skills of our workforce, our ability to innovate and our core talents.”
Policymakers continue to question what the world’s minimum tax rate will be and what exactly will be subject to tax.
A separate proposal calls for an additional tax on the largest and most profitable multinational companies, those with profit margins of at least 10%. Officials want to apply this tax to at least 20 percent of profits exceeding that 10 percent margin for these companies, but continue to debate how the proceeds would be distributed among countries around the world. Developing economies are pushing to make sure they get their fair share.
Mr Bradley, of the House, said the details of a final deal would determine how punitive it would be for business. Representatives from Google and Facebook have been in contact with senior Treasury officials as the process unfolds.
U.S. companies are also concerned that they will be at a disadvantage by a 21% tax President Biden has proposed on their overseas profits, if their overseas competitors pay just 15%. The Biden administration also wants to increase the domestic corporate tax rate from 21% to 28%. Democrats in Congress are moving forward with legislation to make these tax code changes this year.
“If an American company is trying to compete globally with a significantly higher tax burden because of this significantly higher minimum tax on its operations, it’s a competitiveness issue to be successful,” said Barbara Angus, manager of global tax policy at Ernst. & Young.
Washington and Europe also remain at odds over how to tax digital giants like Google and Amazon.
At the G20 summit, finance ministers expressed optimism that such obstacles could be overcome. In his closing press conference after the deal was concluded, Daniele Franco, Italy’s finance minister, hailed the deal as historic and called on countries that had not yet joined to reconsider their decision.
“Accepting global rules is difficult for every country. Every country must be ready to make compromises, ”said Mr. Franco. “Having global rules to tax multinationals, to tax big business profits is a major change, is a major achievement.”
Liz Alderman contributed to the Paris report, and Eshe nelson from London.