U.S. Treasury Secretary Janet Yellen, who is leading the Biden administration's push for a global corporate tax rate, secured a historic deal after garnering support from G-7 finance ministers for a minimum rate of 15%. But getting the agreement endorsed by Congress and the rest of the world will be extremely tough, according to former Trump administration economic adviser Kevin Hassett, who warns it "isn’t going to happen."
“The G-7 has no authority over this,” Hassett told Yahoo Finance Live. “For the EU to do something, they basically need unanimity, and there's no way to rush that. For the U.S., there's a big question whether it would pass, too, because if you analyze it, basically what we're doing is giving foreign countries a hunting license to get revenue from U.S. firms that they couldn't get before.”
The Biden administration’s argument for this tax is that it will create a ‘more level playing field’ by enforcing multinational corporations to pay taxes in countries where they generate profits, instead of solely where they are headquartered.
Yellen described the deal as "historic" and "unprecedented" while saying it would “end the race to the bottom in corporate taxation and ensure fairness for the middle class and working people in the U.S. around the world."
But Hassett disagrees with the Biden administration, arguing that the U.S. is “giving a whole bunch of revenue to foreign countries for basically no good reason.”
“This is a chase jobs overseas, chase business overseas, endeavor,” added Hassett. “There's been bipartisan agreement in the past not to basically let Europeans hold American firms hostage and collect revenue from them in this way. It’s really not in the American interest to pursue the policy that the Biden administration is right now.”
The 15% minimum that was agreed upon by finance ministers of the most advanced economies is lower than the initial proposal from the administration to impose a global tax rate of 21%.
The next big test for support of a global minimum tax will be at the G-20 meeting scheduled for Venice next month.
Seana Smith anchors Yahoo Finance Live’s 3-5 p.m. ET program. Follow her on Twitter @SeanaNSmith