Global tax overhaul faces an unusual hurdle in US Senate debate

An arcane legal argument could America's participation in a global tax deal, backed by 136 countries, in jeopardy.

US president Joe Biden

As the administration of US president Joe Biden and governments around the world celebrate another advance toward an historic global tax accord, an obscure legal question in the US threatens to tear it apart.

At a congressional committee hearing last month, Republican senator Pat Toomey, who opposes the agreement, told Treasury Secretary Janet Yellen that a key portion of the tax deal would require a formal treaty approved by a super-majority in the Senate.

Mr Toomey’s claim marked the opening salvo in what could be a crucial legal debate over what exactly is required of Congress to bring the US into line with the international accord.

While the details may be arcane, the consequences could be enormous.

If Mr Toomey is correct, and a formal treaty is required, the administration will need 67 votes in a Senate, where Democrats currently have just 50 senators.

If the Senate is ultimately required to ratify a treaty, it would take a Herculean effort and complete departure from our current political divide to see this passing,” said Isaac Boltansky, director of policy research at investment bank BTIG.

At stake is a global deal backed by 136 countries, including, as of last week, Ireland. 

In negotiations organised by the Organisation for Economic Cooperation and Development, officials took another step in settling key details. World leaders hope to give their stamp of approval at a G20 summit in Rome on October 30.

The pact aims to accomplish two chief goals: set a global minimum tax rate of 15% to combat corporate profit shifting to low-tax havens, and agree on a formula for taxing the biggest multinationals based, in part, on where they do business instead of where they book profits — a move driven by the increasingly digital nature of international commerce.

Bloomberg