Deputy Treasury Secretary Nominee Talks Digital Services Taxes, Need to Address China Abuses
Senators from both parties asked deputy Treasury secretary nominee Wally Adeyemo about how the U.S. can negotiate with other countries on digital services taxes. There's a negotiation process in the Organization for Economic Cooperation and Development, and most countries with tax proposals are waiting to collect the tax to see if there can be a global solution. But during the last administration, the U.S. trade representative threatened to hike tariffs on imports from countries such as France to convince them not to levy these sorts of taxes.
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Adeyemo was testifying Feb. 23 in front of the Senate Finance Committee, so that he can be confirmed and join the department.
Finance Committee Ranking Member Mike Crapo, R-Idaho, told Adeyemo that these DSTs “unfairly target U.S. companies.” He said both Republicans and Democrats oppose these DSTs, and he asked Adeyemo if he will negotiate “toward a multilateral agreement at the OECD that does not unfairly target U.S. companies and compromise the U.S. tax base?”
Adeyemo said he would work for “a multilateral negotiation that does not unfairly burden US companies, but rather creates a level playing field for competition.”
He was also asked by Sen. Chuck Grassley, R-Iowa, about whether President Joe Biden might seek to raise the corporate tax rate. “My goal, If confirmed, is to make sure that we work internationally through the OECD, and the G-20 tax process to make sure that we create a more level playing field for American companies, especially when it comes to taxation. We need to end what has seemed like a race to the bottom in terms of international taxation, where companies are competing against each other, and in which we're working together to make sure that we're maintaining our tax base.”
Sen. Tom Carper, D-Del., asked Adeyemo if he would have the same position as former Treasury Secretary Steven Mnuchin did, that any taxation abroad of digital firms should be optional. He didn't directly answer, but said that his and Treasury Secretary Janet Yellen's goals are to protect America's tax revenues as they negotiate with other countries on the issue
Sen. Bob Casey, D-Pa., asked about how the government can address distortions, market subsidies and anti-competitive behavior from China.
Adeyemo said his experience in covering international economics in the Obama White House “gave me a perspective that it's going to be critical for us as an administration to make sure that we look at our competition with China holistically.” He said the Chinese view national security and economic issues as intertwined, so the U.S. has to consider that, too.
“Fundamentally what we need to do is demonstrate to those that seek to take advantage of the international trade system,” he said, that those countries need to hear from the countries that established the World Trade Organization, and hear the message that they are going to “hold them accountable for following the rules of the road and making sure that we compete on a level playing field.”