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Joe Biden celebrated last week 130 countries agree Significant changes to the international tax system were made, and consensus was reached after a new proposal made by the United States sparked negotiations that seemed to be deadlocked.

But the momentum that has accelerated since Biden took office may be lost in Washington, where any tax agreement must be supported by the Senate, where the Democrats have very little control.

Will the new tax treaty be passed as a bill?

This is extremely unlikely. Any final OECD agreement may be resolved in two parts by lawmakers on Capitol Hill. The global minimum tax rate of 15%, the second pillar, will require legislators to change domestic tax legislation.

Giving countries the new right to levy taxes based on where large companies generate income, the so-called first pillar, may be dealt with as a separate bill because it changes Washington’s agreements with other countries, which means that the United States must change Existing treaties or create new ones.

How many votes does Biden need in the Senate to pass these bills?

Changes to Pillar 2 of U.S. domestic legislation may be passed through the so-called settlement process. This can be used by the U.S. Congress once in a fiscal year, and bills passed through this route can pass the Senate with a simple majority. The House of Lords split between the Democrats and Republicans at a 50-50 ratio, and U.S. Vice President Kamala Harris voted the tiebreaker.

However, it may be necessary to amend the first pillar of the treaty that requires the support of at least 60 senators — assuming no Democratic defections, that’s 10 Republicans — under mysterious circumstances “Obstruction” rule This applies to most U.S. legislation.

What is the chance of Biden getting 60 votes in the Senate?

Ultra-thin.Republican senators have lined up criticism A fledgling agreement. Earlier this month, John Barasso, the second senior Republican in the Senate, criticized these plans as “anti-competitive, anti-American and harmful.” Pat Tumi, the most senior Republican on the powerful Senate Banking Committee, called these plans “crazy.”

Mike Clapper, the top Republican of the Senate Finance Committee, also criticized the deal and has written to Treasury Secretary Janet Yellen expressing concern that the United States will hand over the right to tax domestic companies to foreign countries.

Can Biden find a solution?

It is possible, but any attempt to bypass the Senate may become the subject of technical and legal debates on Capitol Hill.

Manal Corwin, a former senior Treasury official in the Barack Obama administration and now working at KPMG, said that there may be a way to overthrow the existing treaty through Pillar 1 and Pillar 2 through the use of a settlement process.

Corwin said that although domestic legislation and treaties are equally important under U.S. law, a provision called the “last time” rule allows new U.S. legislation to override existing treaties.

Corwin added that because the agreement will give the United States the right to tax some large multinational companies with annual revenues of more than 20 billion euros and a pre-tax profit margin of at least 10%, the US tax law needs to be changed, and the second level overrides certain treaties. The effect above.

“A treaty says’we will do this, if they will do that’, and we are going beyond this by changing the legislative tools of the internal tax law, which is eligible for settlement,” Corwin said.

But Brian James, another former Treasury official who has worked in the Democratic and Republican administrations, warned that passing legislation through the reconciliation process requires abiding by strict rules.

Efforts to pass legislation using this method are closely scrutinized by members of the Senate, who advise on the interpretation of the House of Lords rules and precedents. Earlier this year, Congressman Elizabeth MacDonough (Elizabeth MacDonough) rule The federal minimum wage increase cannot be included in Biden’s $1.9 trillion stimulus bill.

Jenn, who is now a partner at McDermott Will & Emery, said that a bill that “obviously overrides the treaty” may not qualify for a settlement.

Jann added that efforts to use the settlement process to overthrow the treaty “may even offend Democratic senators,” who tend to “jealously” defend the privileges of the House of Lords.

A European diplomat warned that if the United States uses “legal tricks” to pass partial agreements, it may “open its doors” [up] To a concerted political challenge” in Washington.

How does the Biden administration comment on its strategy?

not much. On Tuesday, Treasury officials stated that they need the support of Congress to pass the new agreement, and they expect that the first pillar will require a treaty. Officials said the details are still being worked out, and the United States will agree on a detailed plan on how to implement the agreement in October.

In addition, a person familiar with the tax negotiations said that any discussion on how the US government will pass the agreement through Congress is “premature.”

“There are still many things that need to be resolved, including how the government will deal with Congress,” the person said.

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