WASHINGTON â A coalition of large multinational corporations has launched a belated lobbying blitz to delay a foreign income tax hike under the Build Back Better plan, saying it would hurt U.S. companies when they compete with foreign competitors.
The dispute represents another potential stumbling block for President Biden’s top domestic policy priority, which relies on corporate tax increases to fund greater spending on education, child care, health care and other national programs.
Lobbyists from major US companies, including Honeywell International Inc.,
General Electric Co.
and Boeing Corp.
, hope to persuade centrist Democratic senators such as Kyrsten Sinema of Arizona and Joe Manchin of West Virginia that the proposed global minimum tax would increase the cost of doing business as a US-based company if it is implemented too early.
The rate hike would codify an agreement by Treasury Secretary Janet Yellen and nearly 140 other countries to set a floor below corporate rates around the world. It is designed to combat the maneuvers of companies that concentrate profits in low-tax jurisdictions.
Business lobbyists have determined that they are unlikely to persuade Mr. Biden and Democratic leaders in Congress to remove the new international taxes altogether. So they switched to lobbying Congress to delay the effective date of the new tax regime until other countries pass minimum tax as well.
âIf Congress enacts a tougher minimum tax regime before other countries enact minimum tax regimes, it would put American businesses and their workers at a significant competitive disadvantage,â said Rohit Kumar , former assistant to Senate Minority Leader Mitch McConnell. (R., Ky.) Who is now the co-head of the national tax office of PricewaterhouseCoopers LLP and helps lead efforts to delay change.
Setting US taxes above other countries “would also reintroduce a tax incentive for US businesses and their assets to seek a new home abroad,” defeating the administration’s goals, added Mr. Kumar.
Supporters of the global minimum tax say delaying its implementation would signal other countries that the United States is unlikely to follow through on the international deal and give companies more time to remove the minimum rate. raised at a future Congress.
The Biden administration pushes back lobbying, saying the new minimum tax would reduce the tax rate difference between the United States and other countries, making it less likely that American companies will try to recognize profits abroad to avoid US taxes.
âThe Treasury Department strongly believes that [this] should happen quickly to ensure that companies are no longer incentivized to move profits and jobs overseas, âsaid Alexandra LaManna, spokesperson for the department.
As House lawmakers envisioned the Build Back Better package earlier this year, business lobbyists persuaded Democrats to postpone overseas income tax implementation until January 1, 2023 The administration had proposed that it enter into force next year.
After the House narrowly approved the legislation last month, lobbyists have turned their attention to the Senate, where they seek to delay the expansion of overseas income taxes until at least 2024.
“The more time we have, it gives the Treasury time to write regulations so that companies know what they are doing,” said Cathy Schultz, head of tax policy at the Business Roundtable, referring to regulations defining details of the new regime.
The lobbying effort is led by a loose association of companies known as Promote America’s Competitive Economy, or PACE, which is led in part by the Business Roundtable, a coalition of CEOs of some of America’s largest corporations. The United States Chamber of Commerce and the National Association of Manufacturers are also involved.
Strategic appeals organized by the PACE coalition regularly attract around 100 lobbyists and lawyers to discuss plans to pressure various senators to come forward. The companies sent a letter to senators on Friday outlining their case of the delay.
Other industry groups are waging separate lobbying struggles to persuade senators to remove provisions they oppose.
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A coalition of companies including JPMorgan Chase & Co., Citigroup Inc.
and Goldman Sachs Group Inc.,
among others, pressure senators to block a little-noticed provision in the House of Commons-approved version of the bill that would give the Federal Trade Commission new powers to impose fines on companies for unfair trade practices and misleading.
Generic drug industry lobbyists are trying to change a provision inserted into the bill by Mr. Biden and Democratic leaders that seeks to keep the cost of brand name drugs down. Generic makers say the current measure would unintentionally hurt low-cost alternatives.
Oil and gas companies are trying to block new taxes on natural gas they say would hurt domestic energy producers.
Industry lobbyists have already selected elements of the Build Back Better plan as it progressed in the House. To wipe out the Senate, the legislation will likely need the support of the 50 Democrats and the two independents in the chamber, as the 50 Republicans oppose it.
Lobbyists in the private equity industry have been successful in persuading Ms Sinema to block a $ 14 billion tax hike on so-called deferred interest income, which they say would hurt corporate investors. its state. Ms. Sinema’s opposition led to the proposal being withdrawn from the House bill.
House drafters also cut a proposal to double the federal tax on cigarettes and apply the rate to vaping and other tobacco products. After pressure from tobacco companies and convenience stores, the proposed tax increase was reduced from $ 100 billion to $ 9 billion. Earlier this month, vaping lobbyists persuaded Democratic senators to scrap the tax altogether.
Amid fierce corporate lobbying, senators amended a proposed 15% minimum tax on financial statement income to exclude earnings from defined benefit pension plans. They also recalled the proposed new limits on interest deductions levied by multinational companies.
Mr Biden’s legislation faces hurdles beyond corporate lobbying efforts. Mr Manchin, a key Democratic vote, did not agree to vote for the bill and says his party is using budget tricks to hide the full cost of the bill.
Mr Manchin’s resistance makes it likely that the Senate will have to postpone the vote on the measure until after the recess, which would give industry lobbyists more time to rally opposition to elements of the legislation.
âRichard Rubin contributed to this article.
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