Washington (Associated Press)-US Treasury Secretary Janet Yellen (Janet Yellen) on Monday urged the adoption of a minimum global corporate income tax to at least partially offset the possible adverse effects of the Biden administration’s proposed increase in the US corporate tax rate.
Yellen said that in order to attract multinational corporations, countries’ sharp cuts in corporate tax rates are “the lowest in 30 years.” The Biden administration will set the minimum tax rates together with other advanced economies in the G20.
Yellen said in a virtual speech to the Chicago Council of Global Affairs: “Competitiveness is far more than that US-headquartered companies compete with other companies in global mergers and acquisitions bids.”
The speech is Yellen’s most notable speech in international affairs so far, and it coincides with the virtual start of the World Bank and International Monetary Fund’s spring meeting.
Yellen said: “It is important to work with other countries to eliminate tax competition and the pressure of corporate tax base erosion.”
President Joe Biden’s proposal to increase the US corporate tax rate from 21% to 28% partially offsets the possibility of the Trump administration cutting it from 35% in its 2017 tax legislation. Biden also hopes to set a minimum U.S. tax rate on overseas company income and make it more difficult for the company to transfer revenue overseas.This increase will help pay for the White House’s ambitious $2.3 trillion infrastructure proposal.
Alan Auerbach, an economist at the University of California, Berkeley, said that Yellen’s remarks are essentially an endorsement of ongoing negotiations with the Organization for Economic Cooperation and Development in 37 countries.
Biden’s US corporate tax proposal includes raising the US minimum tax rate included in Trump’s tax law from 10.5% to 21%. One of the focuses of the OECD negotiations is whether other countries will adopt similar minimums.Biden’s corporate tax measures will also impose heavier taxes on its U.S. subsidiaries in other countries/regions that do not have the lowest U.S. corporate tax.
Auerbach said the OECD has helped reach other agreements on bank secrecy and other issues.
Auerbach said: “There is a precedent for this kind of thing.” “But this will be a big problem because it will allow countries to coordinate their tax systems in an unprecedented way.”
Also on Monday, Biden said that he was “not at all concerned” that the higher corporate tax rate would cause some US companies to move overseas, even though Yellen’s proposed minimum global corporate tax was intended to prevent this from happening.
In answering a reporter’s question, Biden said: “There is no evidence…it’s very strange.”
According to the Tax Foundation, a think tank leaning to the right, the Trump administration’s corporate tax cuts have reduced the U.S. tax rate from the highest tax rate in OECD countries to the 13th place. However, many analysts believe that few large American multinational companies pay all taxes.
“We have 51 or 52 companies from the Fortune 500 that haven’t paid a penny every day for three years?” Biden said. “come on.”
Senator Pat Toomey of R-Penn said that Yellen’s proposal is unlikely to make much progress overseas. He also said that if Republicans regain a majority in Congress in the upcoming elections, they should reverse any corporate tax increases.
“Saboteur alert: This effort is likely to fail, and even if some kind of agreement is reached, it is not binding because it is not a treaty,” Toomey said.
At the same time, Yellen underestimated the potential of the Biden administration’s domestic agenda, including the $1.9 trillion COVID relief package approved last month to stimulate higher inflation. Since the passage of the relief bill, former Treasury Secretary Larry Summers and others have raised such concerns.
Yellen said of the government’s infrastructure recommendations: “I strongly suspect that this will cause inflationary pressure.” “For a long time, the problem has been that the inflation rate is too low, not that the inflation rate is too high.”
Yellen also said, “After four years of wait and see, the United States will increase its efforts to address climate change at home and abroad.”
Yellen said that the Treasury Department will be committed to “promoting the flow of capital to climate-related investments and staying away from carbon-intensive investments.” This approach has aroused the anger of Republican congressmen, who say it threatens the gains of the U.S. oil and gas industry. Ability to loan.
Yellen also pointed out that many developing countries are lagging in vaccinating the population and have also suffered severe economic consequences due to the pandemic. Yellen said that 150 million people worldwide will fall into extreme poverty this year.
Yellen said: “The result could be a deeper and longer-lasting crisis, with debt problems, deep-rooted poverty and growing inequality.”
She said that the Biden administration supports the establishment of a new loan capacity of US$650 billion in the International Monetary Fund to solve such problems. Many Republicans in Congress opposed this new allocation, believing that much of the money would go to relatively affluent developing countries, such as China.
Yellen acknowledged that the extra credit will be allocated to every member of the International Monetary Fund, but he believes that “a lot of resources will go to the poorest countries that need help the most.” She added that countries can also donate part of the funds to the most affected countries. For serious countries, she hopes that many countries can do the same.