Treasury Secretary Janet Yellen will on Monday call for a minimum tax levy for corporations around the world in an effort to prevent companies from moving to lower rates.
“We are working with the G-20 nations to agree on a global minimum corporate tax rate that can stop the race to the bottom,” Yellen told a Chicago Council meeting on global affairs this morning, according to an Axios report that was confirmed by CNBC.
The comments come as President Joe Biden seeks to raise the corporate tax rate as a way to pay for a $ 2 trillion infrastructure improvement plan.
According to the administration’s proposal, the corporate tax rate would increase to 28% from 21%. This increase will take place just four years after former President Donald Trump reduced the rate to 35%, which at the time was the highest in the world.
One of the reasons the Trump administration reduced the corporate rate was the eruption of the relocation of American companies or the relocation of households to countries with lower corporate tax rates, even though much of their operations took place domestically.
Yellen will tell the conference that setting a minimum global corporate rate will help ensure stability and provide a more level playing field for all countries.
“Competitiveness is more than how US-based companies do compared to other companies in global mergers and acquisitions,” said Yellen, according to the Axios report. “It’s 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.”
Companies had also been encouraged to hide their income offshore, which Trump’s tax cuts also addressed by adding incentives for repatriation.
The Biden plan would require an increase in the offshore rate to 21% from 10.5%.