U.S. Proposes a 15% Global Tax on Multinational Companies: Live Updates

The Biden administration proposed a global tax on multinational corporations of at least 15 percent in the latest round of international tax negotiations, Treasury Department officials said on Thursday, a lower-than-expected offer as the U.S. looks to reach a deal with countries that fear hiking their rates will deter investment.

Treasury has been holding meetings this week with a panel of negotiators from 24 countries about the so-called global minimum tax, which would apply to global companies regardless of where they locate their headquarters. The Biden administration hopes to reach an agreement in principle with other countries this summer and is counting on the deal to help sell its plan to raise the corporate tax rate in the United States to 28 percent from 21 percent.

Treasury officials said their offer was met enthusiastically and characterized it as a pivotal moment in the negotiations, which have dragged on for more than two years. The negotiations over the global minimum tax are part of a broader global fight over how to tax technology companies and come as the Biden administration is trying to fix provisions in the tax code that it says incentivizes moving jobs overseas.

As part of its American Jobs Plan, the Biden administration called for doubling the global intangible low-taxed income (or GILTI) tax to 21 percent, which would narrow the gap between what companies pay on overseas profits and what they pay on earned income in the United States. Under the plan, the tax would be calculated on a per-country basis, which would have the effect of subjecting more income earned overseas to the tax than under the current system.

If the 15 percent global minimum tax rate is adopted, it would still leave a gap between that rate and the Biden administration’s proposed U.S. domestic rate. Treasury officials have argued that the new gap would be smaller than the current gap and therefore would not diminish the competitiveness of American companies.

Part of the Biden administration’s ability to sell its plan, however, hinges on whether it can reach a deal with other countries on the global minimum tax so that American companies are not at a competitive disadvantage.

The finance ministers from France and Germany indicated last month that they were willing to back a 21 percent global minimum tax rate. But countries will have to change their laws to formally make the agreement happen and enforcement of the deal will be complicated. Ireland, which is not a member of the steering committee undertaking the negotiations through the Organization for Economic Cooperation and Development, has a 12.5 percent corporate tax rate and has expressed reservations about such an agreement.

Treasury officials said that they never insisted on the 21 percent rate. However, they view the 15 percent level as a floor and will continue to push for a higher rate. They said they believed that other countries were receptive to the idea of adopting higher rate depending on the fate of the changes to the American tax system that are under consideration.

Treasury Secretary Janet L. Yellen has warned that a global “race to the bottom” has been eating away at government revenues, and she has adopted a more collaborative approach to the negotiations than the Trump administration employed.

Ms. Yellen is expected to continue talks about international tax reform with her international counterparts at the Group of 7 finance ministers meeting next month.

The Biden administration on Thursday provided more details on its plans to raise $700 billion in revenue through beefed-up Internal Revenue Service enforcement, saying the additional funds would enable the agency to more easily crack down on tax cheats.

The Treasury Department released a 22-page report laying out the administration’s new “tax compliance agenda,” which is a centerpiece of its plans to pay for a $1.8 trillion infrastructure and jobs proposal. The Biden administration wants to give the I.R.S. $80 billion over the next decade so that it can overhaul its outdated technology and ramp up audits of wealthy taxpayers and corporations to ensure they are not avoiding — or evading — U.S. taxes.

Previous administrations have long talked about trying to crack down on tax evasion and the head of the I.R.S., Charles Rettig, told a Senate committee earlier this year that the agency lacked the resources to catch tax cheats, including those who hide income from cryptocurrencies, costing the government as much as $1 trillion a year.

The Treasury Department estimated on Thursday that in 2019 the tax gap was $584 billion and is on pace to total $7 trillion over the next 10 years.

The Biden administration’s estimates of the return on investment that it could generate from boosting the I.R.S. budget far surpassed projections by the nonpartisan Congressional Budget Office. And John Koskinen, a former I.R.S. commissioner under President Barack Obama and President Donald J. Trump, has suggested that it would be hard for the cash-strapped agency to efficiently spend that much money.

The Treasury Department said that it believes its revenue projections are conservative. Much of the revenue from more rigid enforcement would become evident in the later part of the decade, the report said, but Treasury officials believe that with more enforcement staff and better technology the I.R.S. can chip away at the “tax gap.”

“This revenue is backloaded in the 10-year budget window as several of these new investments — such as hiring revenue agents capable of complex global high net-worth examinations and building the technological infrastructure to support a new information reporting regime — take years to reach their full potential,” the report said.

In the second decade, Treasury thinks that the I.R.S. could bring in an additional $1.6 trillion.

The Biden administration’s proposal would include the hiring of 5,000 new I.R.S. enforcement agents, including those with the kind of sophisticated training needed to understand complex tax evasion schemes.

The Treasury report said that much of the revenue it estimates would come through its “information reporting” rules for financial institutions. This would give the I.R.S. more visibility into corporate accounts to determine how much money they are actually taking in and what should be taxed. The department said it expects that such reporting would be helpful for audits and would serve as a deterrent against corporate tax evasion.

The new information reporting rules would also include an effort by the Biden administration to bring cryptocurrencies into the tax regime and to crack down on those using cryptocurrencies to avoid paying taxes. The report said that cryptocurrency exchange accounts and payment accounts that accept them would fall under the reporting rules. Businesses that receive cryptoassets with a fair market value of more than $10,000 would be subject to information reporting.

The Biden administration has faced questions from Republican lawmakers, such as Senator Mike Crapo of Idaho, to justify its claims that giving the I.R.S. so much money will yield such robust returns. Conservative political groups have criticized the Biden administration plan hire an army of I.R.S. agents, saying it’s a way to hike taxes.

The Treasury report attempted to rebut such claims, noting that increased audits would be focused on the rich.

“It is important to note that the President’s compliance proposals are designed to ameliorate existing inequities by focusing on high-end evasion,” the report said. “Audit rates will not rise relative to recent years for those with less than $400,000 in actual income.”

Snap said on Thursday that it had built a new version of Spectacles, its glasses that interact with the Snapchat app, to allow users to view artificial reality overlaid on the real world.

It is the first time the glasses include augmented reality features. The earlier versions of Spectacles could record videos and photos and import them to the Snapchat app. A year after the initial version was introduced in 2016, Snap wrote off $40 million worth of Spectacles in a quarter because it “misjudged strong early demand.”

The new glasses piggyback on work the company has already done to rapidly build augmented reality into its main messaging app. The Snapchat app allows people to add filters to photos and videos to transform their faces and surroundings. Recently, retailers have taken notice and begun allowing Snapchat users to try on shoes and makeup in augmented reality.

The new Spectacles, which Snap said it had given to content creators but would not yet sell, are part of a set of developments in augmented reality that Snap unveiled during its annual Partner Summit, an event for developers and advertisers.

The company also said it would expand the ability to try on clothes in Snapchat, add augmented reality filters for use during virtual dates in partnership with the dating app Bumble, and offer $3.5 million to fund augmented reality projects by creators.

“Together with the A.R. creator community, our journey building Spectacles over the years has been one of exploration and learning. We’ve made a lot of progress, but our work here is far from over,” Snap’s chief executive, Evan Spiegel, said during the event. “And in many ways, it’s just beginning.”