US Treasury Secretary Janet Yellen said on Monday she was working with G20 countries to agree on a minimum global corporate tax rate and pledged that restoring US multilateral leadership would strengthen the economy world and advance American interests.
In a speech leading up to his first spring meetings of the International Monetary Fund and the World Bank as Chief of the Treasury, Yellen signaled stronger U.S. engagement on issues ranging from climate change to human rights in through the erosion of the tax base.
Comprehensive minimum tax proposed by the Biden administration could help end a “30-year race to the bottom in corporate tax rates,” Yellen said at an online event hosted by the Chicago Council on Global Affairs.
The proposal is a key pillar of President Joe Biden $ 2 trillion infrastructure spending plan, which calls for an increase in the US corporate tax rate to 28% while eliminating certain deductions associated with overseas profits.
Without a global minimum, the United States would again have higher rates than a number of other major economies, tax experts say, while the U.S. proposal could help jump-start negotiations for a tax agreement between major economies.
World Bank President David Malpass said on Wednesday that financial leaders from the Group of 20 major economies will discuss global tax issues, including for digital services, adding that international attitudes are moving away from continued tax cuts.
“Taxes are important for development, and it’s important for the world to do it right,” Malpass told CNBC television.
Separately, a group of Democratic senators unveiled a legislative proposal to reverse parts of former President Donald Trump’s 2017 U.S. tax cuts.
Yellen also said she would use the IMF and World Bank meetings this week to advance discussions on climate change, improve access to vaccines for poor countries and push countries to do more to support a strong global recovery from the coronavirus pandemic.
“We will be better off if we work together and support each other,” Yellen said.
His more cooperative approach stands in stark contrast to the “ America First ” approach of his Trump administration predecessor, Steven Mnuchin. She backed a $ 650 billion increase in IMF currency reserves that Mnuchin opposed last year, and said she will work with international institutions and partners on carbon reduction targets. .
Mnuchin had consistently opposed any reference to climate change in the G20 and in other communiques from large multilateral gatherings.
Yellen also has fall a key request by Mnuchin in international tax negotiations – a provision that would allow large U.S. tech companies to opt out of any new regulations on the taxation of digital services.
PRESSURE ON TAX HAVES
The new head of the Treasury said it was important to “end the pressures of tax competition” and to ensure that governments “have stable tax systems that generate sufficient revenues in essential public goods and meet the needs of governments. crises, and that all citizens share the burden of funding government equitably. “
Separately, a US Treasury official told reporters it was important for the world’s major economies to adhere to a global minimum tax to make it effective, but did not say how many countries were needed for it.
The official said the United States would use its own tax laws to prevent companies from shifting profits or residence to tax havens and would encourage other large economies to do the same.
The Biden plan proposes a minimum corporate tax rate of 21%, coupled with the elimination of income exemptions from countries that do not adopt a minimum tax. The administration says the plan will discourage the transfer of jobs and profits overseas.
Yellen said in his remarks that while advanced economies had successfully supported their economies during the COVID-19 pandemic, it was too early to declare victory and that more support was needed for low-income countries to have access to vaccines.
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