Race to the Down: Yellen Advocates for a Global Minimum Tax Rate | Economy and Business News

A global minimum corporate tax rate can help ensure that everyone pays their fair share and will prevent companies from fleeing to countries with lower corporate tax rates, US Secretary of the Treasury Janet Yellen said Monday.

“Competitiveness is more than how US-based companies behave vis-à-vis other companies in global M&A bids,” Yellen told the Chicago Global Affairs Council in her first official remarks as Secretary of the Treasury.

Speaking ahead of this week’s spring virtual meetings of the International Monetary Fund (IMF) and the World Bank, Yellen addressed more broadly the role of the United States in the post-pandemic global economic recovery.

Yellen’s comments in favor of a global corporate tax rate come on the heels of President Joe Biden’s $ 2.25 trillion infrastructure plan, which was unveiled last week.

Biden plans to pay the bill by raising taxes on American businesses from 21 percent to 28 percent, still well below the 35 percent they were in 2017, when then-President Donald Trump slashed them.

American companies currently pay about 13 percent of profits abroad, and Biden is looking to raise the global minimum tax rate to 21 percent.

“We are working with the G20 nations to agree on a global minimum corporate tax rate that can stop the race to the bottom,” Yellen said, referring to the phenomenon of companies fleeing high-tax economies to establish themselves in a low-income economy. low taxes. economies.

Critics of the proposal say the race to the bottom will hurt workers, who will feel more pain if corporations pay more taxes.

“It’s hard to see how increasing corporate income tax, the burden of which will ultimately fall on workers and shareholders, will help reduce inequality,” Veronique de Rugy, lead researcher at the Libertarian-leaning Mercatus Center at George Mason University in Virginia, he told Al Jazeera.

“In addition, the increase in corporate costs will lead to less investment in fixed assets and that does not help anyone considering that the private sector is the engine of ownership in infrastructure and investment in infrastructure,” he added.

Biden’s proposal would increase the amount of money raised from corporations by 38 percent, according to the Cato Institute, a Washington, DC-based libertarian think tank.

Cato’s director of fiscal policy studies warned that raising the tax rate in the United States will cause US corporations to shift their profits and investments abroad and lower costs.

“If we get Amazon or General Electric to pay more taxes, they will end up paying their workers less,” Chris Edwards told Al Jazeera. “It’s kind of a cat and mouse game. [the Biden administration] they want to increase the corporate tax rate that will drive investments out of the country and then they are trying to introduce rules to prevent it. “

‘It infringes all our sovereignty’

Yellen emphasized that the coronavirus has deepened inequalities within and between countries. In the United States, millions of Americans lost their jobs and many small businesses were forced to close permanently. Women, people of color and low-wage workers continue to feel the greatest economic pain in the pandemic-induced crisis.

“We’re in a deep hole,” Yellen said Monday, adding that the true US unemployment rate is close to 9 percent, compared to the March rate of 6 percent shown in data from the US. Bureau of Labor Statistics that does not include people who have given up looking for work.

The Biden administration is determined to return to a strong system of multilateralism, participating in global markets and protecting and enforcing a rules-based system. A stable world economy that fights poverty and promotes inclusion benefits America.

But too many low- and middle-income countries lack the funding to support their economies and are limited in their ability to buy coronavirus vaccines.

Yellen warned that this could lead to entrenched poverty and inequality reversing decades of progress. Low-income countries are at risk of being left behind and may not have access to the vaccines they need until at least 2023 and, in some cases, until 2024, he said Monday.

“We need to help ease the economic pain in low-income countries,” Yellen emphasized, praising the IMF’s plan to expand special drawing rights (SDRs), a kind of artificial currency that can be exchanged for hard currency, in $ 650 billion to give developing countries the liquidity they need to buy vaccines and keep economies afloat.

But opponents of the proposed global minimum tax rate say it won’t help low-income countries that would benefit from corporations doing business there.

“I think having the global minimum tax would be unfair to poor countries,” said Edwards of the Cato Institute. “It infringes on our entire sovereignty.”


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