US Treasury Secretary Janet Yellen has called on governments to consider adopting a minimum global corporate tax rate, in an effort to deter US companies from relocating amid the Biden administration’s upcoming corporate income tax hike.
In a series of prepared remarks, Yellen told the Chicago Council on Global Affairs that the Biden administration will be urging its allied governments to engage in coordinated tax increases to curb corporate evasion havens. Referring to a “thirty-year race to the bottom,” in which major economies have been cutting corporate tax rates in an effort to entice multinational companies, Yellen revealed she will be working alongside other advanced economies part of the G20 to set a minimum rate.
“Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity,” Yellen explained. The latest remarks follow US President Joe Biden’s $2 trillion infrastructure plan unveiling, which is expected to be paid for in part by tax increases.
As per the administration’s proposal, the US corporate tax rate would increase from 21% to 28%, marking the highest tax hike since the early 1990s. The proposed increase would also be a stark reversal of former President Donald Trump’s tax policy, which just four years ago slashed the rate from 35%— which at the time was among the highest in the developed world.
In a separate account, a US Treasury official told reporters it is imperative that major economies comply with a global minimum tax in order to make it more effective. The official noted the US would use tools in its own tax legislation to deter companies from moving residency or profits to tax haven countries, while also encouraging other nations to do the same.
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