Janet Yellen will use her first major address as secretary of the Treasury to argue for a minimum global corporate tax rate, Axios said, while backing President Biden’s plan to raise US corporate taxes to fund her plan. infrastructure of over 2 trillion dollars.
Why does it matter: Convincing other countries to impose a global minimum tax would reduce the likelihood of companies moving offshore, as Biden is trying to increase the corporate rate from 21% to 28%.
- “Competitiveness is more than how U.S.-based companies compete against other companies in global mergers and acquisitions,” Yellen said today in a speech to the Chicago Council on Global Affairs, according to an excerpt from his remarks. prepared by Axios.
- “It is about ensuring that governments have stable tax systems that bring in enough revenue to invest in essential public goods and respond to crises, and that all citizens share the burden of government funding fairly. ”
- “We are working with the G20 nations to agree on a global minimum corporate tax rate that can stop the race to the end.”
The whole picture: President Trump has reduced the US rate from 35% to 21%, arguing that US companies are at a global disadvantage and are encouraged to move offshore.
- The average rate of companies in the G7 is 24%, some nine countries have recently reduced their corporate rate, according to the Tax Foundation, a conservative tax group.
- Biden’s plan would also increase the international minimum rate for foreign profits from US companies from 10.5% to 21%, which would still be lower than the domestic corporate rate of 28%.
Leading the news: Biden called on five Cabinet secretaries to explain – and sell – his plan to the American public, including Transport Secretary Pete Buttigieg, Energy Secretary Jennifer Granholm, Housing and Urban Development Secretary Marcia Fudge, Labor Secretary Marty Walsh and Secretary of Commerce Gina Raimondo.
- Yellen’s task is to support the international case. His speech is also designed to set the tone for the annual spring meetings of the International Monetary Fund and the World Bank in Washington, which will begin virtually this week.
Between the lines: Biden relied on Yellen to convince business community and reassure Wall Street that its $ 2 trillion infrastructure proposal, in addition to its $ 1.9 trillion stimulus package, will not lead to inflation .
- It is now doing so to convince international finance ministers and central bankers that the world’s largest economies need to act concertedly on corporate rates to avoid a downturn.
Go deeper: Yellen will also challenge the world’s economic powers to focus on climate change and ways to improve access to vaccines for the world’s poorest countries.
- It will demand $ 650 billion for new “Special Drawing Rights” – essentially lines of credit from the IMF that can help developing countries access more US dollars.
- The Trump administration has been skeptical about the new SDR allocations, and many Republicans in Congress are still in opposition.
Bottom line: In trying to persuade other countries to impose a global minimum tax, Yellen acknowledges the risks to the US economy if it acts alone in raising corporate rates.
- “Together we can use a global minimum tax to ensure that the global economy thrives on fairer tax conditions for multinational corporations and to stimulate innovation, growth and prosperity,” she said.