By David Morse
The passage of the 2017 Tax Cut and Jobs Act (TCJA) lit the fuse for corporate tax reform that has been debated internationally over the last two years. Essentially, the United States' willingness to recognize failures in the international tax system have now prompted action in other countries. However, there has been a continuing inability to resolve overall tax avoidance issues. And at this point, control of the discussion has moved to into the international arena via discussions at the Organization for Economic Cooperation and Development (OECD).
The OECD is currently debating their most recent version of a double-pronged plan to address corporate tax avoidance. And that plan would offer some benefits in the U.S. market, but would also involve much complexity. The OECD’s most relevant solution would indeed attempt to tackle profit shifting by some of the world’s largest companies and would attribute part of this untaxed money to market economies. That would be good news for the United States, since it’s a market economy with a strong consumer base. However, the OECD would impose limitations on a company's size, type of profits, and amount of profits. Doing so could potentially target primarily American companies. And their other solutions would likely harm American multinationals more than foreign companies.
Treasury Secretary Steven Mnuchin has been distracted in recent months with efforts to address the COVID-19 pandemic. But he failed to engage early enough in last year’s OECD negotiations to keep control of the narrative. Since then, Congress has adopted a wait-and-see approach concerning the OECD’s actions.
The Coalition for a Prosperous America has engaged internationally on this issue because the United States' domestic businesses should not be disadvantaged by decisions made by an international body. Yet, some in Congress are now looking to the OECD for answers on how to alter the TCJA. CPA believes that any further tax reform should be made in the interest of America’s domestic businesses.
For further reading, please see: https://www.forbes.com/sites/taxnotes/2020/08/11/how-the-oecd-became-the-worlds-tax-leader/#4f41ac056628