A group of 136 nations has agreed on the framework for a massive overhaul of international tax rules that would include imposing a minimum income tax of 15% on multinational corporations.
Led by the Organization for Economic Cooperation and Development, the effort got a big boost this week when Estonia, Hungary and Ireland joined the agreement. All OECD nations now back the deal, as do all members of the G20, which includes the world’s largest economies.
The new minimum rate would apply to corporations with more than 750 million euros, or $866 million, in annual revenues. Once imposed, the tax is projected to generate about $150 billion in additional tax revenues each year.
Major hurdle ahead: Although the agreement itself is a victory for the finance ministers who have been working on the project, including Treasury Secretary Janet Yellen, as a treaty it will have to be approved by two-thirds of the U.S. Senate. But winning that level of support in an evenly divided Senate seems like a long shot at best.
“I think that’s unlikely to happen,” Republican Sen. Pat Toomey (PA) said a few weeks ago, speaking to Bloomberg News about the tax treaty.
Concerned that Yellen may try to implement at least part of the agreement through executive action and without Senate approval, as she suggested she might do recently in testimony before the Senate Banking Committee, Republican Sens. Toomey, Mike Crapo (ID) and Jim Risch (ID) released a statement Friday asserting their authority on the issue.
“As you know, under the U.S. Constitution, a bilateral or multilateral tax treaty would require the advice and consent of the Senate, with a two-thirds vote of approval,” they wrote. “Further, we are unaware of any existing congressional authorization that would permit the Administration to conclude a lesser international agreement, such as a congressional-executive agreement.”
In a note to clients, analysts at the Eurasia Group said that U.S approval seems unlikely, at least in the near term: “While European finance ministers are hoping Yellen can deliver swift US implementation through a legislative shortcut, that scenario remains unlikely and — if at all possible — it would not materialize until after the next presidential election.”
