Janet Yellen, the US Treasury secretary, urged other countries to join Washington in defining a global minimum corporate tax, while she promised to reaffirm the United States’ leadership in international economic policy.
“Together, we can use a global minimum tax to ensure that the global economy thrives on the basis of a more equitable playing field in the taxation of multinational corporations and spurs innovation, growth and prosperity,” said Yellen in a speech to the Chicago Council on Global Affairs on Monday.
Yellen’s call on the eve of the spring meetings of the IMF and the World Bank comes at a time when the Biden government puts a crackdown on tax evasion and tax incentives at the center of its economic agenda.
The White House last week released a plan to invest more than $ 2 trillion to renovate decaying infrastructure and boost clean energy products. It expects to pay for the proposal with a higher corporate tax rate, an increase in its own global minimum tax and other measures designed to prevent the transfer of profits across borders for tax reasons.
“Competitiveness is more than how companies based in the USA fare against other companies in global merger and acquisition offers,” said Yellen. “It is about ensuring that governments have stable tax systems that generate enough revenue to invest in essential public goods and respond to crises, and that all citizens share fairly the burden of financing the government.”
The United States is already pushing for a multilateral agreement on digital taxation in the OECD by the summer, but Yellen’s proposal is for an even broader agreement on corporate taxation covering the G20 and other countries.
While Yellen is pushing for a global corporate tax deal, however, the Biden government faces a big fight over its higher corporate tax proposals in the U.S., including a new provision to raise the global minimum corporate tax by 10, 5% to 21%. Republicans on Capitol Hill and business groups said these tax increases would undermine the competitiveness of American multinationals.
Pat Toomey, Pennsylvania’s Republican senator, said: “Secretary Yellen basically confessed that Biden’s corporate tax hikes will make American workers and companies less competitive. That is why Secretary Yellen is pleading with other developed countries to punish their workers and companies with their own tax increases. “
Joe Manchin, the Democratic senator from central West Virginia who is a key vote in the upper house, also suggested that Biden’s corporate tax plan was too aggressive, saying he would only increase the U.S. tax rate from 21 percent to 25 percent. cent and what other changes were needed. The Biden plan is increased to 28 percent.
“If I don’t vote to get in, I’m not going anywhere. So, we will have some advantage here, ”said Manchin to a local radio station.
In his speech, Yellen stressed that the U.S. is interested in restoring its economic leadership in the world in the wake of the unilateralism of Donald Trump’s presidency and in the face of global challenges, including the fight against the coronavirus pandemic and climate change.
“America in the first place should never mean America alone. For in today’s world, no country alone can adequately provide a strong and sustainable economy for its people. Over time, the lack of leadership and global engagement makes our institutions and economy vulnerable, ”she said.
“The United States needs to have a strong presence on global markets on an equal footing. We will cooperate with partners willing to protect and enforce a rule-based order. “
However, the former Federal Reserve chairman warned that US economic ties with China were more complex. “Our economic relationship with China, as well as our broader relationship with China, will be competitive where it should be, collaborative where it can be and adversary where it should be.”
Yellen, who also served as chairman of the White House’s board of economic advisers under Bill Clinton, expressed some regret about how US economic policy has been conducted in the past.
“In an effort to grow our economies, we neglect our environment. In embracing new technologies, we have not done enough to prepare our workers and our education systems for the changes underway. Although we have embraced trade as an engine of growth, we neglect those who have not benefited, ”she said.
Despite Fed projections that US gross domestic product growth could reach 6.5 percent this year, contributing to a strong recovery from the pandemic, Yellen said it was “too early for advanced economies to declare victory” in the coronavirus crisis.
“I am asking our partners to continue a strong fiscal effort and to avoid withdrawing support too early, to promote a strong recovery and help prevent the emergence of global imbalances,” said Yellen.
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She also said that the slow pace of vaccinations in many developing countries would result in “a deeper and more lasting crisis, with increasing debt problems, more entrenched poverty and growing inequality”.
Yellen dismissed concerns that the stimulus would trigger a damaging jump in inflation, saying that the risks to recovery were “asymmetric” and that there was more danger in doing too little.
“I believe that we have fiscal space to act boldly. I think it is important to mitigate the suffering of the pandemic and the long-term adverse consequences for our production potential in the USA ”.