Saying that governments need “stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises,” Treasury Secretary Janet Yellen made the case for a global minimum corporate tax rate Monday.
In a speech delivered to the Chicago Council on Global Affairs, Yellen called on the world’s major economies to end a “30-year race to the bottom on corporate tax rates” in which governments slash rates to attract globe-hopping businesses. As an alternative, Yellen said she is working with G20 nations on an agreement to impose a minimum tax rate across borders to create “a more level playing field in the taxation of multinational corporations.”
Yellen’s remarks come as the Biden administration seeks to increase corporate tax rates in the U.S., which some critics say could motivate businesses to shift profits to lower-tax countries. A Treasury official told Reuters that while the U.S. would use its own laws to prevent multinationals from shifting profits in pursuit of lower rates, it’s important for countries to limit the practice by working together to establish common rules. The U.S. is also involved in talks led by the Organization for Economic Cooperation and Development with about 140 countries to develop a global tax minimum.
A declaration of US leadership: Yellen’s speech marked a change in course from the previous administration, Bloomberg’s Saleha Mohsin and Christopher Condon reported, signaling an end to the go-it-alone isolationism practiced by President Trump. “America first must never mean America alone,” Yellen said. “A lack of global leadership and engagement makes our institutions and economy vulnerable.”
Yellen will participate this week in the spring meetings of the International Monetary Fund and World Bank, during which the global minimum tax will be on the agenda. In addition, the finance leaders will discuss cooperation on a variety of issues, including the fiscal response to the Covid-19 pandemic, combating climate change, and reducing global poverty, with the U.S. taking a leading role in accordance with what the Biden administration sees as its values and interests. “With few exceptions,” Yellen said, “stable and prosperous economies tend to be less of a security threat to the United States.”