Natural Resources Management Act

Floor Speech

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Mr. GRASSLEY. Madam President, I call up the Lankford amendment No. 158 and ask that it be reported by number.

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Mr. GRASSLEY. Mr. President, I want to express my strong concern about various countries and a lot of places in the world potentially implementing discriminatory tax laws. These laws that they are thinking about target U.S.-based multinational companies operating particularly in the high-tech or the digital industry.

Let me be clear right from the outset. These countries--mostly in Europe--should immediately cease any unilateral actions that target U.S.-based multinationals. Instead, these countries should focus their energy and their efforts on the multilateral solutions that are being developed by the global community operating as the OECD.

I will provide a bit of background for those who haven't been following this issue closely.

Recently, the European Commission proposed a 3-percent digital services tax on the revenues of multinational companies that provide certain digital services to users based in Europe. The tax would not be on profits but, instead, on revenues. By its design, this proposal would specifically target U.S.-based multinational companies.

Implementing such a discriminatory proposal would have required the unanimous approval of the European Union member states. Fortunately, for American companies, the European Union did not go ahead with that proposal.

However, some of the European Union nations see a large pot of money that they can extract from U.S.-based multinationals. They are currently taking unilateral steps to implement new digital taxes that are the same as or are similar to those proposed by the European Commission that the European Commission has decided not to move forward with. To be clear, these types of taxes are discriminatory. They target U.S.-based multinationals. They will likely result in double taxation, and they will create a new transatlantic trade barrier. These effects will then come just as we head into negotiations for a new trade agreement with the European Union. This is the exact opposite direction in which our transatlantic trading relationship should be going.

Last October, then-Finance Committee Chairman Hatch and Ranking Member Wyden sent a letter to the Presidents of the European Council and the European Commission. Hatch and Wyden expressed strong concerns about these indefinite and discriminatory digital services taxes targeting U.S.-based multinational companies. The Senators called on the European Union to abandon the proposal and for member states to delay implementing any similar type of digital services tax. Instead, the Senators argued that the EU member states should refocus their efforts on reaching consensus on a multilateral solution at the OECD.

I happen to concur with the sentiments of those Senators and echo the concerns that Hatch and Wyden raised in that letter. In fact, I reinforced those concerns in a letter with Ranking Member Wyden that we sent to Treasury Secretary Mnuchin just last week. We encouraged the U.S. Treasury Department to stay closely engaged with the OECD and the negotiations that are going on in that organization. Wyden and I also urged the U.S. Treasury Department to encourage its counterparts at the OECD to abandon any unilateral action and to work together on a consensus solution.

OECD members, for years, have recognized tax challenges surrounding the so-called digitalization of the economy. The issues played a significant role in the OECD's tax base erosion and profit-shifting project, and that happened several years ago. It was also prominent in the 2018 interim report on the tax challenges of the digitalization of the broader economy. Just last week, the OECD released a document that outlined at a very high level the timeline for the multilateral consideration of the issues and potential paths forward regarding the tax challenges arising from digitalization.

I look forward to the Treasury Department's participation in this very important negotiation. It would probably be doing it anyway, but we want to reinforce, as members and leaders of the Finance Committee, our interest in the Treasury Department's not letting that slip.

I also encourage nations around the world to participate and allow this process to play out. The alternative is not acceptable because it is discriminatory unilateral action, double taxation, and has potentially negative trade implications. The results are no good outcomes for countries that impose the taxes and no good outcomes for companies that are the subjects of the taxes--mainly this country, the United States.

In our letter last week, Ranking Member Wyden and I encouraged Treasury Department officials and their counterparts to reach a consensus on a measured and comprehensive approach to this issue. We also asked the Treasury Department to keep us informed of the solutions that are being developed and of the progress being made at the OECD. Since he is tasked with leading our trade negotiations with the European Union, we also shared this letter with Ambassador Robert Lighthizer.

Given that the Finance Committee has jurisdiction over tax and trade matters, my colleagues and I will have views on the position taken by the United States in the OECD negotiations. We all want to see a good outcome for both the U.S.-based multinational companies and for the tax base of the United States. We must avoid international tax chaos where significant double taxation is the norm. This is in the interest of the United States. I hope other countries around the world will reach the conclusion that it is in their interests as well.

Other countries should not view the participation of the United States in this OECD exercise simply as academic or a delay tactic. On the contrary, the United States has shown that it takes action on multilateral initiatives. Limitations on interest deductibility and anti-hybrid rules are just a few examples of the items enacted into U.S. tax law, and the Treasury Department and the Internal Revenue Service took regulatory action on various other initiatives.

I think it is worth reiterating that I am invested in this process and in reaching a viable, long-term, multilateral solution. I look forward to staying in close contact with the Treasury Department as the negotiations progress. I also intend to bring up in the Finance Committee issues related to this OECD negotiation and the Treasury Department's positions. If appropriate, we will look into legislative or other actions to address solutions reached at the OECD as well as unilateral actions that are taken by other countries.

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