Bloomberg Tax
March 24, 2023, 4:16 PM

Global Tax Deal Moves Ahead Sparking New Republican Resistance

Samantha Handler
Samantha Handler
Chris Cioffi
Chris Cioffi
Senior Reporter

Republicans are plotting ways to push back on the landmark global tax deal agreed to by nearly 140 countries, including by calling to pull US funding for the OECD that’s leading the negotiations.

GOP lawmakers oppose the additional tax that could be levied on US companies under the global tax plan that was agreed upon in 2021.

Response from Republican lawmakers may include legislation expressing GOP discontent, and pushing a future administration to impose tariffs on countries applying more tax on US companies. While much of the action will have limited impact with a Democratic president and Senate, it signals the party’s intent if it can take the White House in 2024.

SIGN UP for The Exchange, our free weekly tax newsletter.

“There’s concerns about the work product of the OECD,” said Rep. Adrian Smith (R-Neb.), the Ways and Means trade subcommittee chairman. “I would hope that if we are funding an agency, that we would see a better work product that is more in our interest rather than creating a lose-lose scenario and paying for it.”

Smith led a Friday letter among 10 GOP lawmakers asking House appropriators to prohibit the US from giving any funds to the OECD.

The US currently funds 19.1% of Part I of the OECD’s budget, according to the letter addressed to House Appropriations State, Foreign Operations, and Related Programs Chairman Mario Diaz-Balart (R-Fla.) and ranking member Rep. Barbara Lee (D-Calif.).

The OECD declined to comment.

The two-part tax deal would reallocate a slice of the profits of the largest multinationals from countries where they’re currently taxed, to jurisdictions where the companies make sales. Countries are aiming to finish work on this part—known as Pillar One—by mid-year.

The 15% minimum tax on multinationals under Pillar Two is designed to be implemented domestically by governments. Pillar Two will be implemented across the EU at the end of this year, and other jurisdictions have begun implementing the measure, including the UK, Switzerland, and South Korea.

Under Pillar Two, governments can top-up a multinational’s tax rate to 15% when it’s paying less than that in another jurisdiction, and apply the rules within their own borders.

“While U.S. participation in Pillars 1 and 2 requires legislative action, no majority exists in the House or Senate to enact these agreements,” Smith wrote.

US Participation

Despite GOP ire at the OECD, the global tax deal is being negotiated by more than 140 jurisdictions—including the US—with the OECD leading discussions. Final rules have been agreed on Pillar Two, but countries are still negotiating Pillar One.

Momentum started building on the global tax talks under the Trump administration, with the US participating actively in the negotiations.

Democrats largely defend the deal, calling it a critical way to ensure companies pay their fair share of taxes to appropriate jurisdictions.

Sen. Ron Wyden (D-Ore.), Chairman of the Senate Finance Committee, has noted past bipartisan support.

Finance Democrats have several ongoing probes into companies including drugmakers that allocate their profits to low tax jurisdictions.

“We’re spending a lot of time with our investigators looking at this issue in how the pharmaceutical companies make an enormous amount of money here in the United States,” the lawmaker said last month.

Pillar One

One of the primary goals of Pillar One has been to address the tensions over many countries’ concerns that multinationals, particularly the tech giants, aren’t being adequately taxed in some of the countries where they have many users. Countries including France, the UK and India had begun applying digital services taxes to the tech companies, targeting the revenues they made in their markets. The US responded with a threat of tariffs.

A preliminary deal on the global tax agreement in 2021 pulled the countries back from the brink of a trade war, but under the terms of an October 2021 agreement between the US and five countries applying DSTs, that cease-fire will lapse if Pillar One is not completed by the end of this year.

US implementation of Pillar One is one of the biggest question marks hanging over the talks, largely because of the opposition in Congress. Pillar One would be implemented in the form of a multilateral convention, or treaty—which the Senate would have to approve for the US to participate.

Last month, French Finance Minister Bruno Le Maire said negotiations were blocked.

“I see little optimism in the international tax community that a Pillar One agreement will be adopted,” said Catherine Schultz, vice president of tax and fiscal policy for the Business Roundtable. “There are differences of priorities for the developed and developing countries, and resolving those differences appears to be less likely as we get closer to the OECD set deadline of mid-2023.”

Republicans have sought more details from Treasury on the estimated revenue impact of Pillar One, but haven’t been successful. On March 9, Rep. Kevin Hern (R-Okla.) sent a letter giving Treasury until March 24 to respond to his request for the analysis as well as tax revenue modeling data and reports estimating the economic impact of the Pillar Two.

Hern suggested that the Biden Administration is working on negotiations without sufficient input from Congress and needs legislative branch signoff to ultimately implement the deal.

“This Administration has made commitments they have no authority to carry out, and that’s not going to go well for them when they finally do seek out Congressional approval,” he said in an emailed statement Thursday.

During a hearing earlier this month, Treasury Secretary Janet Yellen told the Ways and Means Committee that Pillar One’s revenue impact on the US can’t be exactly calculated while “significant disagreements” remain in the negotiations, but that it will be roughly revenue-neutral for the US.

Pillar Two

GOP House Ways and Means Committee members are also weighing options to express their concern with other countries implementing a 15% global minimum tax that they would apply to US companies, GOP aides said.

For some, that means legislation reflecting the GOP position, to protect the US tax base from foreign encroachment by the minimum tax, an aide said. The bills would show what a Republican administration may pursue, according to an aide.

In particular, lawmakers are concerned about a Pillar Two provision known as the undertaxed profits rule, which could let other countries apply the minimum tax rules to multinationals’ low-taxed US income.

Chairman Jason Smith (R-Mo.) sent a letter last month to the OECD Secretary-General Mathias Cormann, urging him to reject all proposals that would affect US jobs and tax revenue.

Jason Smith called Pillar Two’s undertaxed profits rule “fundamentally flawed.”

On the Senate side, Sen. Thom Tillis (R-N.C.) noted that companies that incur more taxes because of the Pillar Two agreement could sue the administration and GOP could lend support.

“We really do need to be prepared to write amicus briefs for people in the private sector who bring a lawsuit,” Tillis said in an interview.

The US needs to have counters to the other countries’ policies, Tillis said. He said those options could include pushing for tariffs, if there’s a Republican administration. Though, “tariffs also create escalation,” he added.

Treasury declined to comment.

—With assistance from Isabel Gottlieb.

To contact the reporters on this story: Samantha Handler in Washington at; Chris Cioffi at

To contact the editors responsible for this story: Kim Dixon at; Vandana Mathur at

Learn more about Bloomberg Tax or Log In to keep reading:

Learn About Bloomberg Tax

From research to software to news, find what you need to stay ahead.

Already a subscriber?

Log in to keep reading or access research tools.