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Yellen calls for the global minimum corporate income tax

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WASHINGTON – U.S. Treasury Secretary Janet Yellen on Monday called for the passage of a global minimum corporate income tax, an effort to at least partially offset any disadvantage that may arise from the Biden administration’s proposed increase in the rate of US corporate tax.

Citing a 30-year-old race at the end of which countries have cut corporate tax rates in a bid to attract multinational businesses, Yellen said the Biden administration will work with other advanced economies in the G20 to set a minimum.

The competition has more to do with how US-based companies compete against other companies in global mergers and acquisitions, Yellen said in a virtual speech to the Chicago Council on Global Affairs. It is about ensuring that governments have sound tax systems that raise enough revenue to invest in essential public goods.

The speech was Yellen’s highest profile to date on international affairs and came just as the spring meetings of the World Bank and International Monetary Fund began in a virtual format.

It is important to work with other countries to end the pressures of tax competition and the erosion of the corporate tax base, Yellen said.

President Joe Biden has proposed raising the corporate tax rate to 28% from 21%, partially overturning the Trump administration cut from 35% in its 2017 tax legislation. Biden also wants to impose a minimum US corporate income tax overseas and make it harder for companies to shift profits offshore. The increase would help pay off the White House’s ambitious $ 2.3 trillion infrastructure proposal.

Yellens’s remarks essentially serve as an endorsement of the negotiations that have been going on in the 37-nation Organization for Economic Co-operation and Development for nearly two years, said Alan Auerbach, an economist at the University of California at Berkeley.

Biden’s corporate tax proposal in the U.S. includes an increase in the U.S. minimum tax that was included in Trump’s tax bill, from 10.5% to 21%. One focus of the OECD talks is whether other countries will adopt similar minimums. Biden’s corporate tax measure will penalize other countries without a minimum corporate tax by taxing their US subsidiaries more

Auerbach said the OECD has helped push for other agreements on issues such as banking secrecy.

There is precedent for this kind of thing, Auerbach said. But it would be a big deal because it would make countries coordinate their tax system in ways they have not had before.

Also Monday, Biden said he is not at all concerned that a higher corporate tax rate would cause some U.S. companies to relocate overseas, although Yellen’s proposed global minimum tax is intended to prevent that from happening.

There is no evidence of this … this is strange, Biden said in response to a question from reporters.

According to the Tax Foundation, a right-leaning think tank, the Trump administration’s corporate tax cuts lowered the U.S. rate from the highest among OECD countries to the top 13. Many analysts have argued, however, that some large multinational corporations pay the full tax.

Do we have 51 or 52 corporations from Fortune 500 who have not paid a single penny a day for three years? Tha Biden. Come on.

Warner for distributors: This attempt is likely to fail and even if there is some sort of agreement, it will be non-binding because it is not a treaty, Toomey said.

Yellen, meanwhile, downplayed the potential for Biden’s administrations’ domestic agenda, which also includes a $ 1.9 trillion COVID relief package approved last month, to boost higher inflation. Former Treasury Secretary Larry Summers, among others, has raised such concerns since the bill was passed.

I strongly doubt that this will cause inflationary pressures, Yellen said, referring to the administration’s proposal for infrastructure. The problem for a very long time has been 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 its side for four years.

“The Treasury will work to promote the flow of capital toward climate-friendly investments and away from carbon-intensive investments,” Yellen said. industry to access the necessary borrowing.

Yellen also noted that many developing nations have stalled on vaccinating their populations and have also experienced severe economic consequences from the pandemic. About 150 million people worldwide will fall into extreme poverty this year, Yellen said.

The result is likely to be a deeper and longer crisis, with growing debt problems, more entrenched poverty and growing inequality, Yellen said.

The Biden administration supports the creation of $ 650 billion in new lending capacity at the IMF to address such issues, she said. Many Republicans in Congress are against the new split, arguing that most of the funding will go to relatively better developing countries, such as China.

Yellen acknowledged that the additional credit would be distributed to each member of the IMF, but argued that significant resources would go to the poorest countries most in need. Nations can also donate some of their funds to the hardest hit countries, which she expects many to do, she added.

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