Yellen requires a world company tax of not less than | Illinois Information
WASHINGTON (AP) – US Treasury Secretary Janet Yellen on Monday called for the introduction of a global minimum corporate tax to at least partially offset the disadvantages that could result from the Biden administration’s proposed increase in the US corporate tax rate.
Citing a “30 year race to the bottom” in which countries cut corporate tax rates to attract multinational corporations, Yellen said the Biden government will work with other advanced economies in the Group of 20 to set a minimum.
“Competitiveness is about more than how US-based companies hold up against other companies in global merger and acquisition bids,” Yellen said in a virtual speech to the Chicago Council on Global Affairs. “It’s about ensuring that governments have stable tax systems in place that generate sufficient income to invest in essential public goods.”
The speech was Yellen’s best-known to date in international affairs and took place in a virtual format at the start of the World Bank and International Monetary Fund spring meetings.
“It is important to work with other countries to end the pressures of tax competition and the erosion of the corporate tax base,” said Yellen.
President Joe Biden has proposed raising the U.S. corporate tax rate from 21% to 28%, partially reversing the Trump administration’s 35% cut in 2017 tax legislation. Biden also wants to set a US minimum tax on corporate income overseas, making it harder for companies to move their profits overseas. The increase would help fund the White House’s ambitious $ 2.3 trillion infrastructure proposal.
Yellen’s remarks essentially serve as confirmation of the negotiations that have been going on for the past two years at the 37-nation organization for economic cooperation and development, said Alan Auerbach, an economist at the University of California at Berkeley.
Biden’s U.S. corporate tax proposal calls for an increase in the U.S. minimum tax, which was included in Trump’s tax bill, from 10.5% to 21%. One focus of the OECD discussions is the question of whether other countries will set similar minimum standards. Biden’s corporate tax measure would also penalize other countries without a minimum corporate tax by taxing their subsidiaries more heavily in the United States
Auerbach said the OECD helped promote other agreements on issues such as banking secrecy.
“There are precedents for such things,” said Auerbach. “But that would be a big deal because it would push countries to coordinate their tax systems in ways they have never done before.”
Also on Monday, Biden said he was “not at all” concerned that a higher corporate tax rate would cause some US companies to move overseas, despite Yellen’s proposed global minimum corporation tax to prevent it.
“There’s no evidence … that’s bizarre,” Biden replied to a question from reporters.
The Trump administration’s corporate tax cut lowered the U.S. tax rate from the highest among OECD countries to the 13th highest, according to the Tax Foundation, a right-wing think tank. However, many analysts have argued that few large US multinationals have paid the full tax.
“We have 51 or 52 Fortune 500 companies that haven’t paid a penny a day in three years?” Said Biden. “Come on.”
Senator Pat Toomey, R-Penn., Said Yellen’s proposal is unlikely to make much headway overseas. He also said Republicans should reverse any corporate tax hike if they regain a Congressional majority in the upcoming election.
“Spoiler alert: These efforts are likely to fail and even if there is an agreement it will be non-binding as it is not a contract,” Toomey said.
Yellen, meanwhile, has downplayed the potential of the Biden government’s domestic agenda, which includes a $ 1.9 trillion COVID relief package approved last month, to boost inflation. Former Treasury Secretary Larry Summers has raised such concerns since the relief bill was passed.
“I strongly doubt that this will cause inflationary pressures,” said Yellen, referring to the government’s infrastructure proposal. “For a long time, the problem was too low inflation, not too high inflation.”
Yellen also said the United States will step up its efforts at home and abroad to combat climate change “after sitting on the sidelines for four years.”
The Treasury Department will work to “encourage the flow of capital towards climate-friendly investments and away from high-carbon investments,” Yellen said. This approach has sparked the ire of GOP Congressmen who say it threatens the US oil and gas industry’s ability to access needed credit.
Yellen also noted that many developing countries are lagging behind in vaccinating their populations and also having harsh economic consequences from the pandemic. Up to 150 million people worldwide will find themselves in extreme poverty this year, Yellen said.
“The result is likely to be a deeper and longer-lasting crisis, with increasing problems of debt, entrenched poverty and growing inequality,” Yellen said.
Biden’s administration is backing $ 650 billion in new credit capacity with the IMF to address such issues, she said. Many Republicans in Congress oppose the new allocation, arguing that much of the funding would go to relatively better-off developing countries like China.
Yellen acknowledged that the additional loan would be distributed to each IMF member, but argued that “significant resources will go to the poorest countries that are most needed”. Nations can also donate some of their funds to the hardest hit countries, which is what they expect from many, she added.
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