US: House Republicans Condemn Biden-Harris Administration's Support for OECD Global Tax Deal

| Image credits: Mathias Cormann, OECD Secretary-General (middle), by Foreign, Commonwealth & Development Office is licensed under CC BY 2.0.

In a forceful rebuke of the Biden-Harris Administration’s support for the Organization for Economic Co-operation and Development's (OECD) global minimum tax deal, Republican House leaders warned that the move undermines U.S. sovereignty and economic competitiveness. In a letter addressed to OECD Secretary-General Mathias Cormann, Speaker Mike Johnson, Majority Leader Steve Scalise, Majority Whip Tom Emmer, Conference Chair Elise Stefanik, and Ways and Means Committee Chairman Jason Smith, joined by the entire Republican contingent of the committee, expressed staunch opposition to the Administration's efforts to implement the global minimum tax without Congressional approval.

The primary concern revolves around the OECD’s new undertaxed profits rule (UTPR), which Republicans argue would subject U.S. businesses to significant tax liabilities in foreign jurisdictions, leading to a potential forfeiture of over $100 billion in U.S. tax revenue. The letter accuses the Biden-Harris Administration of overstepping its authority, asserting that under the U.S. Constitution, the power to levy taxes resides exclusively with Congress.

“Implementation of the UTPR and other OECD policies would force the United States to forfeit $120 billion in revenue to foreign governments while offering competitive advantages to China and others,” the Republican leaders wrote. “The Biden-Harris administration lacks the authority to impose any tax deal on Americans without the approval of the U.S. Congress. Doing so would violate the United States Constitution.”

Republican lawmakers point to the Constitution’s requirement that all bills related to revenue must originate in the House of Representatives. By engaging in unilateral tax negotiations with the OECD, the Biden administration is accused of bypassing Congressional oversight, effectively sidestepping the tax-writing Committee on Ways and Means.

CHINA’S ROLE IN THE DEBATE

A significant portion of the letter focuses on China’s potential to exploit the global tax deal's provisions. According to the Republicans, China’s practice of utilizing direct government subsidies could undermine the OECD’s stated goal of ensuring a minimum level of taxation across member countries. China’s economic practices, coupled with its alleged reluctance to abide by international rules, present a significant challenge to the global tax framework.

“China will exploit the OECD global tax deal’s loophole for direct government subsidies, which are a hallmark of Chinese economic activity,” the letter argues. “Last year, the Chinese government instructed state-owned companies to phase out their use of the big four accounting firms due to security concerns and Western influence, opting instead for local auditors subject to CCP control.”

The Republicans further warn that U.S. companies would be disproportionately affected by the UTPR. The policy could allow foreign governments to “claw back” vital U.S. tax incentives, such as credits for research and development and low-income housing, putting American workers and businesses at a disadvantage.

LEGAL AND LEGISLATIVE ACTIONS

The Republican leaders also voiced support for a lawsuit filed by the American Free Enterprise Chamber of Commerce challenging the UTPR. They hinted at potential Congressional action to counter the OECD’s global minimum tax, which they view as a threat to U.S. economic sovereignty.

“If the OECD – in collusion with the Biden-Harris Administration and other countries – proceeds with this aspect of the global minimum tax deal, Congress will be forced to pursue countermeasures to protect U.S. sovereignty and the fair treatment of American workers and businesses,” the letter concludes.

This action follows a year of Republican opposition to the global minimum tax, dating back to a delegation’s visit to Paris in 2023, where members of the Ways and Means Committee met with OECD officials to express concerns over the Biden Administration’s tax negotiations.

RECENT OECD BEPS DEVELOPMENTS:

• Nine countries sign OECD’s Multilateral Convention to implement the Pillar Two STTR
• Latest OECD publications on the outcomes of the implementation of BEPS Action 13 and Action 14
• Argentina's Implementation of the Large-Investment Regime Bill