WASHINGTON (AP) – U.S. Treasury Secretary Janet Yellen on Monday called for the adoption of a minimum global corporate income tax, trying to refute some of the disadvantages that could arise from raising rates. Biden Administrative Corporate Tax Proposed in the United States
Referring to the “30-year race to the bottom” in which countries have cut corporate tax rates to attract multinational businesses, Yellen said the Biden administration will work with other top 20 economies to set minimums.
“The competitiveness is more than how US-headquartered companies compare to other companies in global bidding, mergers and acquisitions,”; Yellen said in a virtual speech to the Global Council of Affairs. Chicago “is about making sure the government has a solid tax system that increases enough income to invest in necessary public goods.”
The speech was Yellen’s highest speech in international affairs and took place as the World Bank and International Monetary Fund spring meeting began in a virtual fashion.
“It is important to work with other countries to end the pressure of the tax competition and the collapse of the corporate tax base,” Yellen said.
President Joe Biden has proposed a hike in the U.S. corporate tax rate to 28% from 21%, removing some of the Trump administration’s cuts from 35% in the 2017 tax law.Biden wants to impose a minimum U.S. tax. For corporate income abroad and to make it more difficult for companies to switch overseas income. The increase would help pay for the White House’s $ 2.3 trillion infrastructure offer..
Yellen’s speech has been the key to endorsing talks that have been going on at 37 nations for about two years, said Alan Auerbach, an economist at the University of California, Berkeley.
Biden’s corporate tax proposition in the US includes an increase in the minimum US tax included in Trump’s tax law from 10.5% to 21%. One of the focus of the OECD negotiations is that other countries will accept the minimum. Is it close to the same? Biden’s corporate tax measure punishes other countries with no minimum corporate tax by taxing more U.S. subsidiaries.
Auerbach said OECD has helped promote other deals on issues such as bank secrecy.
“There is a precedent for this,” Auerbach said, “but this will be a big deal because it will allow countries to coordinate their tax systems in ways they have never done before.”
Additionally, on Monday, Biden said he was “not at all” worried that higher corporate tax rates would force some U.S. companies to move their manufacturing bases abroad, even though the global minimum corporate tax would be a risk. Proposed by Yellen, is intended to prevent that from happening.
“There’s no evidence that … that’s strange,” Biden said in response to a reporter’s question.
According to the Tax Foundation, an idea group leaning right, the Trump administration’s corporate tax cuts have lowered the U.S. rate from the highest in the OECD to the 13th highest, however, many analysts argued that the company skipped. Few of the major US nations pay full taxes.
“We have 51 or 52 companies out of the Fortune 500 who haven’t paid a single penny a day for three years?” Biden said.
Pat Toomey, R-Penn., Said Yellen’s proposals are unlikely to make much progress overseas. He also said Republicans should abolish corporate tax hikes if they get a majority in Congress in the coming elections.
Spoiler alert: this attempt is likely to fail, and despite some concessions, it will be a matter of time. But it will not be binding because it is not a treaty, ”said Toomey.
In the meantime, Yellen demonstrated the potential of Biden’s domestic agenda, including the $ 1.9 trillion COVID relief package approved last month to fuel higher inflation. Former Finance Minister Larry Summers and others have raised the concern since the relief bill passed.
“I strongly suspect it will put inflationary pressures,” Yellen said, referring to the management’s infrastructure proposal. “The long-standing problem is inflation that is too low, not too high.”
Yellen also said the United States would increase its efforts both at home and abroad to combat climate change “after four years of sitting on the sidelines”.
The Treasury will work to “promote the flow of capital into climate-consistent investment and avoid carbon-intensive investments,” said Yellen. The approach angered GOP members of Congress, which said. That it threatens the ability of the US oil and gas industry to access necessary borrowing.
Yellen also noted that many developing countries are lagging behind in vaccinating their populations and are also suffering the severe economic impact from the epidemic. This year, as many as 150 million people worldwide will be in severe poverty.
“The outcome is likely to be a deeper and longer crisis, with more debt burden, more ingrained poverty and increased inequality,” Yellen said.
Biden’s management backed the creation of $ 650 billion in new lending capacity at the IMF to resolve the issue. Many Republicans in Congress oppose the new allocation, arguing that much of the capital will flow to relatively better developing countries such as China.
Yellen admits that additional credit will be distributed to each IMF member, but argued that “significant resources will be sent to the poorest, most in need.” To the hardest-hit country, which she expects many people to do, she added.