The U.S. is still actively participating in OECD negotiations on global digital tax rules, the organization’s top tax official said Wednesday.
“The U.S. has not walked away from the negotiation, the U.S. has not pulled out,” said Pascal Saint-Amans, director of the Organization of Economic Cooperation and Development’s Center for Tax Policy and Administration. He spoke Wednesday at a virtual event hosted by Bloomberg Tax.
The OECD is working to overhaul global tax rules and agreements to address how the big technology companies are taxed. Pillar One of the plan would reallocate multinationals’ profits to the jurisdictions where they have users or consumers, while Pillar Two would establish a global minimum tax to address tax competition. Pillar One has proved the more politically fraught, with the U.S. last winter calling for the rules to be made optional for multinationals.
The OECD has been working on technical issues and is “near a solution, near the agreement” on Pillar One, Saint-Amans said. “On Pillar One the goal is to have the basis for a deal,” by the fall—showing that agreement is close, even if it is not finalized, he said.
Work on Pillar Two is further along because there aren’t political disagreements over the scope of the measure, he said, but agreement on Pillar Two could still be slowed by countries that want it to be attached to Pillar One, Saint-Amans said.
“We’ll see what happens” after the Group of 20 Finance Ministers meet in July, he said, adding: “Things are in flux. But what is for sure is that we are working.”
Treasury Secretary Steven Mnuchin called for a pause in talks over the first “pillar” during the pandemic, according to a June 12 letter from Mnuchin to several EU finance ministers. U.S. involvement was temporarily cast into doubt last week when U.S. Trade Representative Robert Lighthizer said the U.S. was withdrawing from the talks.
In the meantime, retaliatory trade measures loom between the U.S. and a cohort of countries imposing unilateral digital taxes, after the U.S. opened trade investigations into 10 measures in early June.
Mnuchin’s letter was triggered by countries calling for refocusing Pillar One on digital companies first, Saint-Amans said. The U.S. has called for the OECD solution to not “ring-fence,” or single out, the digital economy.
Mnuchin said the U.S. would support work resuming later in the year, according to the June 12 letter, which was seen by Bloomberg Tax. The U.S. Treasury declined to comment on Wednesday.
“Can you reach a deal after the U.S. election?” Saint-Amans said. “Why not, everything’s possible.”
Still, a part of the project may continue into 2021, he said.