At OECD, Chairman Smith Warns That Congress Will Reject New Job-Killing Global Tax Surrender

"Secretary General Cormann, thank you for hosting us today.

The OECD's mission--"Better Policies for Better Lives"--is more important than ever. Countries must find ways to encourage economic development and jobs. Every challenge that we face becomes worse in a world of less opportunity and less growth. And that's why each Member here has been following the OECD global tax project so closely: ultimately, it will affect the lives of our constituents.

The OECD "two-pillar solution" is probably the largest and most complicated tax project ever undertaken. Your team has done an admirable job of facilitating discussions among countries and seeking common ground. While we have concerns with many aspects of the project, we appreciate the willingness to engage in a dialogue.

As you know, Members of the Ways and Means Committee have primary responsibility for our tax laws. In the United States, the taxing power rests in the House, as close to the people as possible. No tax proposal can become law in the United States unless it originates in the Ways and Means Committee. And we will not surrender our tax-writing authority to anyone.

You know of our concerns with the Biden Administration's negotiations at the OECD. I don't think that Republicans' goals differ from most other countries participating in the Inclusive Framework. We oppose corporate tax abuses and support fewer disputes among countries and an improved global tax system. We also want to defend our tax base and jobs from direct attack.

Unfortunately, we're concerned that the current framework flips the hinges: rather than closing the door on tax avoidance, the deal opens new opportunities for China and others to maneuver and exploit the rules. We worry that the global tax system is headed for more, not fewer, disputes among countries. And we are shocked at the extent to which the Biden Administration has been willing to surrender the U.S. tax base.

I would like to share four key points with you today:

1. As you know, the U.S. already has a strong global minimum tax. GILTI has been in place for nearly six years, and it raises billions of dollars every year. We do not object to Europe or others implementing their own GILTI-type taxes. However, we will not suddenly repeal our proven system in favor of an untested regime with substantial complexity and uncertainty.

2. We encourage the OECD to develop specific actions to address the risk of China and others abusing the system, including identifying manipulation of companies' financial accounts and preventing state subsidies or refundable credits from being used as an avoidance tool.

3. If countries move forward with the UTPR surtax, we will continue to aggressively pursue tax and trade countermeasures. We won't allow rogue foreign tax collectors to attack the U.S. operations of U.S. companies or harass U.S. companies and workers operating in third-party countries.

4. We continue to strongly object to the discriminatory digital services taxes that countries have targeted at U.S. companies. With respect to Pillar 1, we similarly oppose a structure that disproportionately impacts the United States.

The next steps in the OECD global tax project will have a significant effect on the future of our economy and our workers. We look forward to the conversation today, and we hope to work with you on a path forward.

Again, thank you for making time to meet with us."

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