WASHINGTON (Reuters) – Leading Democrats on the Senate Finance Committee on Monday proposed major changes to former President Donald Trumps’ tax reforms in 2017 to remove what they see as incentives for businesses to move their activities abroad and transfer their profits to tax havens.
The plan proposed by Democratic Senators Ron Wyden, Sherrod Brown and Mark Warner parallels some of the corporate tax hike proposals announced last week by President Joe Biden to fund $ 2 trillion in investments in companies. American infrastructure.
Senators target provisions of the landmark Tax and Employment Act of 2017 that govern how foreign corporate income is taxed, the global low-tax intangible income system, the tax on intangible income derived from foreign and tax base erosion and abuse.
The schemes were aimed at returning deferred offshore income from companies in the United States at lower tax rates, where those profits could be invested in American jobs. But in practice, Democrats said, they created new incentives for companies to invest more overseas to take advantage of new exemptions.
Many companies did not even report a profit. Of those that did, most were spent on share buybacks, Warner told reporters on a conference call.
The Democratic plan would not repeal these taxes, but would change them to equalize their rates and bring them closer to the main corporate rate. In addition, the plans would create new incentives to invest in research and jobs at headquarters in the United States.
The proposal is likely to meet strong opposition from Republicans, who have criticized Bidens’ plans to roll back the party’s signature Trump-era legislative achievement as putting U.S. businesses at a competitive disadvantage. He could pass with just Democratic votes as part of Bidens’ larger infrastructure plan, but that would require the Senate’s 50 Democrats to back him.
For one of the taxes, known as BEAT, which aims to capture at least some taxes on corporate profits transferred to foreign entities, the Democratic plan would also restore tax credits for domestic energy investments. clean and low-income communities while adding a higher amount. rate band.
The Bidens plan proposed raising the corporate tax rate from 21% to 28%, as well as an overall minimum tax that would be negotiated with other major economies.
Wyden said he believes such a global minimum corporate tax being considered under the Biden plan could work alongside reforms proposed by Democratic senators, provided Treasury Secretary Janet Yellen can strike a good multinational deal. at the OECD.
Yellen called for a global minimum tax on Monday as she attended her first spring meetings of the International Monetary Fund and the World Bank as Secretary of the Treasury.
Regarding a request by fellow Democratic Senator Joe Manchin for a 25% corporate tax rate, Wyden, the chairman of the Finance Committee, said the final rate would be the result of discussions in the Democratic caucus and the committee. .
Wyden also said he believed all Senate Democrats would support the international tax reform proposals.
Reporting by David Lawder; Edited by Dan Grebler
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