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    Global Tax Overhaul Gains Steam as G20 Backs New Levies

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    The approach marks a reversal of years of economic policies that embraced low taxes as a way for countries to attract investment and fuel growth.VENICE — Global leaders on Saturday agreed to move ahead with what would be the most significant overhaul of the international tax system in decades, with finance ministers from the world’s 20 largest economies backing a proposal that would crack down on tax havens and impose new levies on large, profitable multinational companies.If enacted, the plan could reshape the global economy, altering where corporations choose to operate, who gets to tax them and the incentives that nations offer to lure investment. But major details remain to be worked out ahead of an October deadline to finalize the agreement and resistance is mounting from businesses, which could soon face higher tax bills, as well as from small, but pivotal, low-tax countries such as Ireland, which would see their economic models turned upside down.After spending the weekend huddled in the halls of an ancient Venetian naval shipyard, the top economic officials from the Group of 20 nations agreed to forge ahead. They formally threw their support behind a proposal for a global minimum tax of at least 15 percent that each country would adopt and new rules that would require large global businesses, including technology giants like Amazon and Facebook, to pay taxes in countries where their goods or services are sold, even if they have no physical presence there.“After many years of discussions and building on the progress made last year, we have achieved a historic agreement on a more stable and fairer international tax architecture,” the finance ministers said in a joint statement, or communiqué, at the conclusion of the meetings.The approach marks a reversal of years of economic policies that embraced low taxes as a way for countries to attract investment and fuel growth. Instead, countries are coalescing around the view that they must fund infrastructure, public goods and prepare for future pandemics with more fiscal firepower at their disposal, prompting a global hunt for revenue.“I see this deal as being something that’s good for all of us, because as everyone knows, for decades now, the world community, including the United States, we’ve been participating in this self-defeating international tax competition,” Treasury Secretary Janet L. Yellen said on the sidelines of the G20 summit. “I’m really hopeful that with the growing consensus that we’re on a path to a tax regime that will be fair for all of our citizens.”The agreement followed a joint statement last week that was signed by 130 countries who expressed support for a conceptual framework that has been the subject of negotiations at the Paris-based Organization for Economic Cooperation and Development for the better part of the last decade. The O.E.C.D. estimates that the proposal would raise an additional $150 billion of global tax revenue per year and move taxing rights of over $100 billion in profits to different countries.The backing of the broad framework by the finance ministers on Saturday represented a critical step forward, but officials acknowledged that the hardest part lies ahead as they try to finalize an agreement by the time the leaders of the Group of 20 nations meet in Rome in October.Among the biggest hurdles is an ongoing reluctance by low-tax jurisdictions like Ireland, Hungary and Estonia, which have refused to sign on to the pact, potentially dooming the type of overhaul that Ms. Yellen and others envision. Hungary and Estonia have raised concerns that joining the agreement might violate European Union law and Ireland, which has a tax rate of 12.5 percent, fears that it will upend its economic model, siphoning the foreign investment that has powered its economy.Absent unanimous approval among the members of the European Union, an accord would stall. Establishing a minimum tax would require an E.U. directive, and directives require backing by all 28 countries in the union. Ireland had previously hinted that they would object to or block a directive and Hungary could prove to be an even bigger hurdle given its fraught relationship with the union, which has pressed Hungary on unrelated rule-of-law and corruption issues.Prime Minister Viktor Orban of Hungary has stated that taxes are a sovereign issue and recently called a proposed global minimum corporate tax “absurd.” Hungary’s low corporate rate of 9 percent has helped it lure major European manufacturers, especially German carmakers including Mercedes and Audi.Bruno Le Maire, France’s finance minister, said on Saturday that it was important that all of Europe supports the proposal. G20 countries plan to meet with Ireland, Hungary and Estonia next week to try and address their concerns, he said.“We will discuss the point next week with the three countries that still have some doubts,” he said. “I really think the impetus given by the G20 countries is clearly a decisive one and that this breakthrough should gather all European nations together.”Policymakers also have yet to determine the exact rate that companies will pay, with the United States and France pushing to go above 15 percent, and negotiations are continuing over which firms will be subject to the tax and who will be excluded. The framework currently exempts financial services firms and extractive industries such as oil and gas, a carve-out that tax experts have suggested could open a big loophole as companies try to redefine themselves to meet the requirements for exemptions.Domestic politics could also pose hurdles for the countries that have agreed to join but need to turn that commitment into law, including in the United States, where Republican lawmakers have signaled their disapproval, saying the plan would hurt American firms. Big business interests are also warily eyeing the pact and suggesting they plan to fight anything that puts American companies at a disadvantage.“The most important thing is understanding that if there is going to be an agreement, that there cannot be an agreement that is punitive toward U.S. companies,” said Neil Bradley, the chief policy officer at the U.S. Chamber of Commerce. “And that, of course, is of great concern.”A report this month from the European Network for Economic and Fiscal Policy Research found that only 78 companies are expected to be affected by the overhaul but nearly two-thirds of them are American. The researchers estimated that the new taxes would raise $87 billion in revenue and that Apple, Microsoft, Alphabet, Intel, and Facebook would pay $28 billion of that total.At the heart of the proposal is the idea that, if countries all agree to a minimum tax, it will prevent businesses from seeking out low-tax jurisdictions for their headquarters, depriving their home countries of revenue. Ms. Yellen has criticized what she calls a “race to the bottom” in global taxation.Ms. Yellen said that she would be working in the coming months to address the concerns of countries with reservations but that the deal could still proceed even if some countries did not join. She pointed to an enforcement mechanism that would raise U.S. taxes on corporations that have headquarters in countries that continue to be tax havens but do business in America.Still, changing domestic tax laws will not be quick or easy, including in the United States, whose success in ushering in a new tax regime is being closely watched as a harbinger of whether a global overhaul can come to pass. Senior officials at the G20 meetings said that approval of the agreement within the United States was crucial to its broader acceptance.Republican lawmakers have suggested they will put up a fight.Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee and one of the architects of the 2017 tax cuts, said that the Biden administration’s tax proposals would never pass.“Certainly in Congress there’s a great deal of skepticism,” Mr. Brady said in a telephone interview this week. “My prediction is that at the end of the day, even if an agreement is reached, what the president will bring back to Congress is an agreement that advantages foreign companies and workers over American ones.”Ms. Yellen indicated that Democrats were prepared to pass as many of the tax changes as they can through a budgetary procedure called reconciliation that would alleviate the need for Republican votes. She assured her international counterparts that the Biden administration was ready to deliver its end of the bargain and pushed back against the idea that the new tax system would harm American workers.“For the United States, it’s going to be a fundamental shift in how we choose to compete in the world economy,” Ms. Yellen said. “Not a competition based on rock-bottom tax rates, but rather on the skills of our work force, our ability to innovate and our fundamental talents.”Policymakers continue to grapple with what the global minimum tax rate will be and what exactly will be subject to the tax.A separate proposal calls for an additional tax on the largest and most profitable multinational enterprises, those with profit margins of at least 10 percent. Officials want to apply that tax to at least 20 percent of profit exceeding that 10 percent margin for those companies, but continue to debate how the proceeds would be divided among countries around the world. Developing economies are pushing to ensure that they will get their fair share.Mr. Bradley, of the Chamber, said that the details of a final agreement would determine how punitive it would be for companies. Representatives from Google and Facebook have been in touch with senior Treasury officials as the process has played out.American businesses are also worried about being put at a disadvantage by a 21 percent tax that President Biden has proposed on their overseas profits, if their foreign competitors are only paying 15 percent. The Biden administration also wants to raise the domestic corporate tax rate from 21 percent to 28 percent. Democrats in Congress are moving forward with legislation to make those changes to the tax code this year.“If a U.S. company is trying to compete globally with a significantly higher tax burden because of this significantly higher minimum tax on its operations, that’s a competitive issue for being able to be successful,” said Barbara Angus, a global tax policy leader at Ernst & Young.Washington and Europe also remain at odds over how to tax digital giants like Google and Amazon. At the G20 summit, finance ministers expressed optimism that such obstacles could be overcome. In his closing news conference after the deal was reached, Daniele Franco, Italy’s finance minister, hailed the agreement as historic and called on the countries that had yet to join to reconsider.“To accept global rules is, for each country, difficult. Each country has to be prepared to compromise,” Mr. Franco said. “To have worldwide rules for taxing multinationals, for taxing the profits of big companies is a major change, is a major achievement.”Liz Alderman More

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    Belarus’s forced landing of airliner sends shock waves through industry.

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    Some airlines in Eastern Europe began diverting their planes to avoid Belarus airspace on Monday, a day after that country’s leader sent a fighter jet to force down a Ryanair flight, allowing authorities to seize an opposition journalist on board.The shocking move has unleashed a storm of criticism against Aleksandr G. Lukashenko, the Belarus president who has clung to power despite huge protests last year. The European Union is considering penalties against the country. At least two airlines said that they were diverting flights away from Belarus airspace as a precaution, but most carriers seem to be waiting to be told what to do by the European authorities.In an interview on Monday with an Irish radio broadcaster, Ryanair’s chief executive, Michael O’Leary, condemned the actions of the Belarus authorities, who ordered the plane, flying from Athens to Vilnius, Lithuania, to land in the Belarus capital of Minsk and then arrested a dissident journalist on board, Roman Protasevich, and his companion.“This was a case of state-sponsored hijacking, state-sponsored piracy,” Mr. O’Leary told interviewers on Newstalk.Mr. O’Leary, however, said he was waiting for instructions from European Union authorities in Brussels about whether to steer other flights away from Belarus.“We, like all the European airlines, are looking for guidance today from the European authorities and from NATO,” he said.He added that it would be an easy matter for his flights to avoid Belarus. “We don’t fly over Belarus much,” he said. “It would be a very minor adjustment to fly over” Poland instead, he added. Ryanair, a discount airline based in Ireland, describes itself as Europe’s largest airline group.Other airlines are already making changes.AirBaltic, the Latvian national airline, said that its flights would avoid entering Belarus airspace “until the situation becomes clearer or a decision is issued by the authorities.” The rerouted flights include ones from Riga, the airline’s home base, to Odessa in Ukraine and Tbilisi in Georgia.Another airline that flies in the area, Wizz Air, said that it would alter the path of a flight from Kyiv in Ukraine to Tallinn in Estonia so as to skirt Belarus.“We are continuously monitoring and evaluating the situation,” a spokesman for Wizz Air, which is based in Hungary, said. More

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    U.S. and Europe Will Suspend Tariffs on Alcohol, Food and Airplanes

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    AdvertisementContinue reading the main storySupported byContinue reading the main storyU.S. and Europe Will Suspend Tariffs on Alcohol, Food and AirplanesThe governments agreed to temporarily halt levies on billions of dollars of products as they search for a settlement to a long-running clash over subsidies given to Airbus and Boeing.The dispute over subsidies to Airbus and Boeing started almost two decades ago.Credit…Ulrich Lebeuf for The New York TimesMarch 5, 2021Updated 5:09 p.m. ETThe United States and European Union agreed to temporarily suspend tariffs levied on billions of dollars of each others’ aircraft, wine, food and other products as both sides try to find a negotiated settlement to a long-running dispute over the two leading airplane manufacturers.President Biden and Ursula von der Leyen, the president of the European Commission, agreed in a phone call on Friday to suspend all tariffs imposed in the dispute over subsidies given to Boeing and Airbus for “an initial period of four months,” Ms. von der Leyen said in a statement.“This is excellent news for businesses and industries on both sides of the Atlantic and a very positive signal for our economic cooperation in the years to come,” she said.In a statement, the White House said Mr. Biden had “underscored his support for the European Union and his commitment to repair and revitalize the U.S.-E.U. partnership.”The World Trade Organization had authorized both the United States and Europe to impose tariffs on each other as part of two parallel disputes, which began almost two decades ago, over subsidies the governments have given to Airbus and Boeing. The E.U. had imposed tariffs on roughly $4 billion of American products, while the United States levied tariffs on $7.5 billion of European goods.The aircraft dispute is an early test of the Biden administration’s ability to rebuild America’s relationship with Europe, which U.S. officials see as crucial for accomplishing other trade and foreign policy goals.Former President Donald J. Trump took a more adversarial and aggressive stance toward the bloc. He accused it of cheating the United States on trade and imposed tariffs on European metals, aircraft and other products. He also threatened further tariffs against European automakers.The Biden administration has said it would restore ties with the E.U., formerly a close ally, as it seeks to form coalitions to take on bigger global problems, like China’s unfair trade practices. And it has committed to pressing Europe for a settlement on the aircraft dispute, as well as other continuing trade spats over metals, digital service taxes and other issues.“Finally, we are emerging from the trade war between the United States and Europe, which created only losers,” Bruno Le Maire, the French finance minister, said on Twitter. He added that a burden would be lifted for French winegrowers, whose sales have been pummeled by steep retaliatory tariffs that the Trump administration imposed on imports to the United States.In a joint statement with the European Union, the Office of the United States Trade Representative said the suspension would take effect “as soon as the internal procedures on both sides are completed” and that the agreement signaled “the determination of both sides to embark on a fresh start in the relationship.”The statement said both sides were committed to reaching a comprehensive solution to the disputes, which would include rules on future aircraft subsidies, monitoring and enforcement, and efforts to address “the trade distortive practices of and challenges posed by new entrants to the sector from nonmarket economies, such as China.”The Distilled Spirits Council, a trade group representing the liquor industry, called the decision a “a promising breakthrough in the longstanding trade dispute on civil aircraft subsidies, which has left much destruction to the spirits sector in its wake.”The deal would suspend a 25 percent tariff imposed by Europe on American rum, brandy and vodka, as well as a 25 percent tariff the United States imposed on liqueurs and cordials from Germany, Ireland, Italy and Spain, and Cognacs and other grape brandies from France and Germany. On Thursday, the United States said it would temporarily suspend tariffs levied against the United Kingdom, including on Scotch whisky, as part of the dispute for a period of four months.Monika Pronczuk More

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    A Top House Democrat Prods Biden to Reopen E.U. Trade Talks

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    AdvertisementContinue reading the main storySupported byContinue reading the main storyA Top House Democrat Prods Biden to Reopen E.U. Trade TalksThe chairman of the powerful Ways and Means Committee countered the president-elect’s pledge to focus first on domestic priorities.Representative Richard E. Neal, who leads the Ways and Means Committee, said a trade deal with the European Union would help restrain China.Credit…Anna Moneymaker for The New York TimesAna Swanson and Dec. 11, 2020Updated 4:56 p.m. ETWASHINGTON — The chairman of the powerful House Ways and Means Committee urged the incoming administration to renew trade negotiations with the European Union, countering a pledge by President-elect Joseph R. Biden Jr. to postpone any new trade talks until after the United States has made significant domestic investments.The statement on Friday, from Representative Richard E. Neal, Democrat of Massachusetts, raises the question of whether congressional pressure could persuade the Biden administration to take a more aggressive approach to trade negotiations with close allies.Mr. Biden has downplayed expectations for new trade negotiations early in his term, saying he wants to first wrest control of the pandemic and make substantial investments in American industries like energy, biotech and artificial intelligence.“I’m not going to enter any new trade agreement with anybody until we have made major investments here at home and in our workers,” Mr. Biden said in a New York Times interview last week.But since congressional opposition would be one of the main obstacles to any new trade agreement, the support of key Democrats could be strong motivation for initiating talks.In an interview, Mr. Neal suggested that reaching a trade agreement with the European Union would help deal with the rising economic threat from China, which has used hefty subsidies, state-owned companies and other practices to dominate industries and challenge the trade rules long embraced in the West.Mr. Neal called Mr. Biden’s approach “fine and fair,” but argued that pursuing E.U. trade negotiations “is part of a foreign policy challenge as it relates to China’s expansionist activities.”“I think that we should, right now, be preparing to match the aggressive nature of what China’s doing in the world,” he added.Mr. Biden would need the support of Mr. Neal and others to cement such a deal. So-called trade promotion authority, a statute that sets out guidelines for the executive branch as it negotiates trade deals and streamlines the approval process, is set to expire in July; any deals submitted to Congress after that could face a more difficult path to ratification. It’s not yet clear whether the Biden administration will petition Congress to renew the authority.Despite deep historic ties, the United States and Europe have not always had an easy trading relationship. The governments have argued for decades over tariffs, farm subsidies and food safety standards, and efforts to reach a comprehensive trade pact under both the Obama and Trump administrations were ultimately scrapped.But Mr. Biden has often spoken of the importance of strengthening American alliances, and he and his advisers have been eager to remedy ties with Europe that have been strained by President Trump’s confrontational trade approach. They also see much common ground with the European Union on issues like climate change, labor standards and consumer protections, as well as countering China’s growing geopolitical power and trade practices.Business & EconomyLatest UpdatesUpdated Dec. 11, 2020, 6:16 p.m. ETSilicon Valley giant Oracle will move its headquarters to Texas.A surprise savior for Britain’s pubs: Scotch eggs.Stocks dip as Brexit and U.S. stimulus talks remain stuck with time running out.Both governments appear eager to make progress on trade issues that have festered under the Trump administration, including spats over subsidies to the aircraft industry and plans by European countries to tax American technology giants.Those discussions would be led by Mr. Biden’s trade representative, Katherine Tai, whom the president-elect introduced on Friday as his nominee for the post. Ms. Tai is on Mr. Neal’s staff as the Ways and Means Committee’s chief trade lawyer.Mr. Neal declined to elaborate on conversations he’d had with Ms. Tai about pursuing trade deals with the European Union, but said, “I think we’re in broad agreement on the nature of the challenge.”Mr. Neal pointed to the United States-Mexico-Canada Agreement as a “blueprint” for new trade pacts. The accord, the successor to the North American Free Trade Agreement, was negotiated by Mr. Trump and revised by congressional Democrats, including Mr. Neal and Ms. Tai, before going into force this year.“What we were able to do with U.S.M.C.A. in terms of environment, labor standards, enforcement — I think we have some momentum,” Mr. Neal said. He said he was continuing to work to drum up support for using a European trade deal to counter China’s influence around the globe.In his statement on Friday, Mr. Neal said pursuing a trade deal with the Europe Union would be a “strategically sound choice” as the United States tried to compete economically with China and rebuild its economy from the pandemic recession.He urged the Biden administration to engage with allies in Europe and elsewhere to “formulate a strategic, far-reaching, forward-looking, robust package of programs and investments to defend against anti-competitive, anti-democratic influences of China’s policies.”AdvertisementContinue reading the main story More