The treasury secretary, Janet Yellen, made the case for a global minimum corporate tax rate on Monday as the Biden administration faces opposition to its plans to raise rates on US businesses.
Yellen’s comments come as Republicans and some Democrats have pushed back on Joe Biden’s proposed $2.3tn infrastructure investment bill. The bill would be funded in part by raising rates on US business and closing loopholes that allow domestic and foreign corporations to take advantage of lower taxes overseas.
“Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen said in remarks to the Chicago Council on Global Affairs. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
The Organization for Economic Cooperation and Development (OECD) has been working on a new set of cross-border tax rules that would include a global minimum tax rate for multinational corporations.
Yellen’s comments are a marked departure from the isolationism exhibited under the Trump administration and the treasury secretary underlined the need for international cooperation.
“Over the last four years, we have seen first-hand what happens when America steps back from the global stage,” Yellen said. “‘America first’ must never mean ‘America alone’.”
Biden’s plans would reverse some of Trump’s landmark tax cuts, increasing the corporate tax rate to 28% from 21% and increasing the minimum taxes paid on US companies’ foreign income while making it harder for foreign-owned companies with US operations to shift profits to low-tax countries.
“President Biden’s proposals announced last week call for bold domestic action, including to raise the US minimum tax rate, and renewed international engagement, recognizing that it is important to work with other countries to end the pressures of tax competition and corporate tax base erosion,” Yellen said. “We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom.”
