With only four countries holding out, the majority of the IF finalized their agreement on 8 October 2021. For more information about the specifics of the agreement and the timeline for implementation, see the client alert prepared by our Global Tax Practice, Emerging Consensus - Inclusive Framework approves updated Two Pillar plan.
Countries have reacted quickly to the agreement. On 21 October 2021, Treasury released Joint Statement from United States, Austria, France, Italy, Spain and the United Kingdom, Regarding a Compromise on a Transitional Approach to Existing Unilateral Measures During the Interim Period Before Pillar 1 is in Effect. Under the Compromise, Austria, France, Italy, Spain, and the United Kingdom have agreed to refrain from imposing new Unilateral Measures on all companies including digital services taxes (DSTs) and to withdraw existing ones by the time Pillar 1 takes effect. To the taxes due under existing Unilateral Measures (whether or not paid) after 1 January 2022, the Compromise provides a credit mechanism to offset the first-year Pillar 1 tax liability. In exchange, the US agreed to terminate trade actions under Section 301 against these countries.
In addition, Treasury Secretary Janet Yellen expressed confidence that the US Congress would approve legislation to implement the global corporate minimum tax, likely in the budget reconciliation bill. Christopher Hanna discusses how some members of Congress have reacted to the IF's agreement, Congressional reaction to OECD Pillars.
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