SO NOW WHAT? If Pillar One negotiations continue to stall, that could eventually lead to a number of countries implementing unilateral digital services taxes. In fact, the U.S. has an agreement with a string of countries to delay any DSTs until June 30. So you might think that the Biden administration would especially be feeling the pressure of that upcoming deadline. But in a lot of ways, the current problems with China and India might prove to be at the very least politically convenient for Yellen and Treasury. In short, that’s because it could buy more time — during a presidential election year, no less — for what have long been tricky negotiations over Pillar One, which could also further push off implementation of those unilateral DST’s. Both Yellen and Giorgetti said during last week’s meetings that transfer pricing issues are driving the divide in Pillar One talks. (Transfer pricing essentially is the terms by which goods and services are exchanged between related companies, like a parent and a subsidiary.) Yellen specifically mentioned Amount B, part of the Pillar One agreement that’s meant to simplify transfer pricing standards, as an area where the U.S. and India aren’t seeing eye-to-eye. The Treasury secretary also has brought up transfer pricing in recent hearings with the tax committees, noting the concerns that lawmakers have had in that area. The Biden administration is “trying to get tax certainty for American companies that face significant and costly disputes about transfer pricing and other matters,” Yellen told the Senate Finance Committee in March. “There would be substantial benefits to American businesses from this agreement if we conclude it.” But for the most part, GOP tax writers have told Yellen during those hearings how little they think of both pillars of the global tax deal, the second of which would install a global minimum tax on corporations. And to be blunt about it, there have long been very serious doubts in Washington tax circles about whether Congress could or would implement any Pillar One deal, which is why the current hang-ups might not be the worst development for the administration. Certainly, the chances of lawmakers backing either pillar currently appear to be next to nil, given the depth of GOP opposition to the global deal — something that negotiators from other countries well know. For their part, Democrats failed to beef up America’s existing minimum tax when they had full control in Washington during the first two years of President Joe Biden’s term. And to be honest, the Biden administration and other Democrats have long seemed more invested in Pillar Two when it comes to the global tax deal. YOU’VE GOT MORE TIME: The Tax Reform Project, a new initiative launched this year that seeks more practitioner input in the crafting of tax policies, will now be accepting submissions through the end of July. The initiative has invited practitioners to submit their own ideas for improving the tax system, with the original deadline being May 27. The extension of that timeline comes as Patrick Oakford, previously the principal deputy assistant secretary for policy at the Labor Department, has come to run the Tax Reform Project, which is housed at Yale Law School. Natasha Sarin, a Yale law professor and former senior official in the Biden Treasury, and former Treasury Secretary Larry Summers are among the experts who launched the project back in the winter. Sarin previously told Weekly Tax that she hopes the initiative will help influence next year’s big negotiations over the expiring provisions from the GOP’s 2017 tax law, by giving insights on how proposals can be simpler and more workable.
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