A stalemate in Washington could jeopardize a significant tax deal that was meticulously negotiated among 140 countries over nearly a decade. The United States' failure to ratify the deal may trigger a tax war among wealthy nations, impacting tech giants like Google, Apple, Meta, and Amazon.
The Organisation for Economic Co-operation and Development (OECD) worked tirelessly to broker an agreement among member countries to close tax loopholes for large multinational corporations, potentially recouping up to $240 billion annually in lost tax revenue.
The OECD's 'Pillar 1' reform, which mandates companies to pay taxes where they generate profits rather than where they are headquartered, was agreed upon in 2021 after years of effort.
However, the US Senate's failure to ratify the agreement by the June 30 deadline has stalled progress. While the Biden administration supports the plan, Senate Republicans oppose it, leading to a deadlock. Former President Donald Trump has also expressed opposition to the reforms.
Other countries are taking independent actions in the absence of a global agreement. Canada has implemented a local tax on major tech firms, and New Zealand plans to introduce its digital services tax in 2025.
Despite the setbacks, negotiations are ongoing, with the OECD expressing optimism about reaching a final agreement. Failure to implement a global deal could result in a tax war among nations and create uncertainty for multinational corporations.
In other news, the US labor market showed resilience in May, with job openings increasing to 8.14 million. This positive trend indicates confidence in the economy despite ongoing challenges.
Additionally, the Federal Trade Commission has blocked mattress maker Tempur Sealy's acquisition of Mattress Firm, citing concerns about competition suppression and price hikes for consumers. The proposed deal, valued at $4 billion, would have given the combined company significant market power, potentially harming competition and consumer choice.
