US Treasury Secretary Janet Yellen on Monday said she was working with G20 countries to adopt a global minimum corporate tax rate that would stem the erosion of government revenues. A collective effort by the world's 20 major economies would help end the "thirty-year race to the bottom on corporate tax rates," Yellen said at a virtual event hosted by the Chicago Council on Global Affairs. "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," she said. Yellen's speech comes days after President Joe Biden announced plans to raise the corporate tax to finance a massive $2 trillion infrastructure and jobs program.
Biden's plan would raise the US corporate tax to 28% and the minimum for multinationals to 21%, partially reversing the previous administration's cut from 35% in its 2017 tax legislation. The Biden administration's proposed tax hike has received pushback from Republicans and some Democrats. The critics argue that the higher rates would make the US less attractive to companies, that would then relocate to countries with lower corporate tax rates. A global minimum would at least partially offset any disadvantage that might arise from the proposed increase in the US rates.
The new Treasury chief said the practice of seeking tax havens erodes government revenues and undermines an economy's competitiveness. G20 finance ministers are expected to discuss global tax issues, including taxes for digital services during a virtual meeting on Wednesday. A G20 agreement on a global minimum tax would boost negotiations underway at the 37-nation Organization for Economic Cooperation and Development (OECD) on similar minimums.
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