A global tax war is looming. It could hit big technology companies hard

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A stalemate in Washington could destroy a groundbreaking tax agreement that 140 countries had worked painstakingly on for nearly a decade.

Some analysts say the US’s inability to ratify the agreement could lead to a tax war between the richest countries, hitting tech giants like Google, Apple, Meta and Amazon particularly hard.

What happens: The Organisation for Economic Co-operation and Development (OECD) worked for years to negotiate an agreement among its member countries that would close loopholes that could allow large multinational companies to save up to $240 billion in taxes each year.

In 2021, the OECD reached an agreement that all parties accepted. The so-called “Pillar 1” reform only requires companies to pay taxes in the country in which they earn their money – regardless of whether the company has its headquarters there or not.

To achieve this goal, the OECD and its partners have been busy with more than a decade of hard work.

The problem: The reform of the first pillar was supposed to be ratified by June 30. That did not happen.

While the Biden administration broadly supports the plan, Senate Republicans oppose it, and a divided Senate has blocked the U.S. from ratifying the agreement. (“Under the U.S. Constitution, tax treaties require the advice and consent of the Senate by a two-thirds majority,” the Senate Finance Committee website says.)

Former President Donald Trump, meanwhile, has indicated that he would not support the reforms if he were re-elected to the Oval Office in November.

Other countries aren’t waiting to find out. Canada recently introduced a local tax on the world’s largest technology companies, something the OECD treaty was designed to prevent. New Zealand has also announced that it will introduce its own digital tax on large multinational companies starting in 2025.

Manal Corwin, director of the OECD’s Centre for Tax Policy and Administration, says negotiations are still ongoing.

“Countries are still at the negotiating table precisely because we are making progress,” he wrote in a statement on Monday. “With each of these milestones, we are getting closer and closer to the finish line, whether or not we successfully conclude by a certain date,” he said. “That is precisely why commitment remains high and why we remain optimistic that the (group) can reach a final agreement.”

What it means: If no global agreement is put in place, some countries will begin to compete with large multinational corporations for revenue by cutting taxes. This is sometimes referred to as a “tax war.”

This also means that large technology companies will have to contend with differing tax laws around the world as national taxes continue to rise (see Canada and New Zealand).

“When companies feel secure and can predict where politics is heading and what the global financial outlook will look like in the foreseeable future, they are much more confident about investing,” says Megan Funkhouser of the Information Technology Industry Council, a group that represents the technology sector.

If taxation and global policies towards digital companies are “uncertain, unpredictable and unstable,” the expert said, companies “will not be able to make investments, contribute to economic growth, and create and maintain jobs.”

The number of available jobs in the U.S. rose unexpectedly in May, suggesting continued resilience in the nation’s labor market, reports my CNN colleague Alicia Wallace.

According to the Bureau of Labor Statistics’ latest Job Openings and Labor Turnover Survey (JOLTS) released Tuesday, the number of job openings jumped to 8.14 million in May, up from 7.91 million in April.

According to FactSet’s consensus estimates, economists had expected the number of job openings to fall to 7.91 million.

Despite the increase in job postings, which can be quite volatile, The May JOLTS report highlights an important milestone for the US labor market: The ratio of vacancies to unemployed fell to 1.22, reaching the same level as in February 2020, a month before the pandemic-related lockdowns that shook the global economy.

As the JOLTS data show, this ratio has been steadily declining since reaching a record high of 2.0 in March 2022.

The Bureau of Labor Statistics will release its latest jobs report at 8:30 a.m. ET on Friday.

The Federal Trade Commission takes a clear stance against a mattress merger.

The agency voted unanimously on Tuesday to block mattress maker Tempur Sealy’s purchase of Mattress Firm, reports my CNN colleague Ramishah Maruf.

In May 2023, Tempur Sealy – the world’s largest mattress supplier and manufacturer – agreed to acquire the United States’ largest bedding retailer in a deal valued at approximately $4 billion.

The FTC approved a lawsuit in federal court to block the takeover.

The commission said the proposed deal would stifle competition and raise prices for mattress buyers, and give the companies “tremendous power” in the mattress supply chain. The FTC also said documents showed competing mattress suppliers would lose access to their main retail channel. Those suppliers employ thousands of American workers, it said.

The deal would have given the combined company 3,000 stores and 71 manufacturing facilities, and the transaction was expected to close in the second half of 2024. Tempur Sealy’s portfolio includes Tempur-Pedic, Sealy and Stearns and Foster.