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It was an idea It was widely discussed Across global capitals: Impose the same minimum corporate tax rate worldwide to prevent companies from shopping in the country that can file the smallest tax invoice.
Now, she has a new strong advocate. Treasury Secretary Janet Yellen Monday expressed her support for the minimum tax rate, and provided vital support to the US government.
In a speech, Yellin said that the global minimum tax rate would stop what she described as the “30-year race to the bottom” that allowed major companies to avoid contributing fully to vital national needs.
Supporting the global tax rate is a new item in Biden’s administration’s stricter approach to corporate tax.
President Biden is already counting on higher tax revenues on corporations to fund his administration’s $ 2.3 trillion infrastructure plan.
Yellen’s approval of the minimum global tax rate now aims to ensure that companies pay a minimum level of tax regardless of where they are located – reducing the temptation to move to another country. It will also ensure that high tax rates at home do not put US companies at a global disadvantage.
“It’s important to work with other countries to end the pressure of tax competition,” Yellen told the Chicago Council on Global Affairs. “We are working with the G20 countries to agree on a global minimum corporate tax rate that could stop the race to the bottom.”
It is not clear if low-tax countries will adopt a higher global floor. For example, Ireland has gained a major competitive advantage with a lower tax system, and has attracted the likes of Apple to the country.
This has often pitted Ireland against higher taxation governments. But the companies are fiercely opposed to the global tax rate overall, making it unclear whether countries will end up agreeing to the proposal.
In the United States, business groups are like American Chamber of Commerce They have already said they oppose the Biden administration’s plan to increase corporate taxes to fund infrastructure, even if they applaud the increased investment in areas such as roads, ports and broadband.
The Biden plan would raise the corporate tax rate from 21% to 28%, while also taxing corporate foreign income at a rate of at least 21%. The administration says the plan will generate enough revenue over 15 years to cover eight years of infrastructure spending.
The corporate tax rate was 35% prior to the 2017 tax cut by the Trump administration. But companies are often able to lower their tax bill through various deductions or by stopping profits in lower tax havens abroad.
Left-leaning Institute for Taxation and Economic Policy It notes that 55 large companies – including Nike, FedEx, and Duke Energy – did not pay federal income taxes in the most recent fiscal year, despite reporting collective profits of more than $ 40 billion to their shareholders.
As a share of the total economy, American corporations pay lower taxes Than many of their foreign competitors. Corporate tax revenue at the federal, state, and local levels in the United States is 1% of GDP, compared to about 2% in Germany, France, and Italy and about 4% in Japan and Canada.
Yellin said it was important that “all citizens share the burden of equitable financing of the government.”
Yellen also argued: “Competitiveness is about more than the way US-based firms deal against other firms in global M&A bidding.” “It’s about making sure that governments have stable tax systems that provide enough returns to invest in basic public goods and respond to crises.”