Treasury Secretary Janet Yellen on Monday will ask for a minimum tax on companies around the world in an effort to prevent companies from moving to find lower rates.
“We are working with the G-20 nations to agree on a global minimum corporate tax rate that could prevent the race to the bottom,” Yellen said at a Chicago Global Affairs Council conference this morning, according to an Axios report that was confirmed by CNBC.
The comments come as President Joe Biden seeks to increase the corporate tax rate as a way to pay for a $ 2 trillion infrastructure improvement plan.
According to the government’s proposal, the corporate tax rate would rise from 21% to 28%. That increase would come just four years after former President Donald Trump cut the rate by 35%, which at the time was the highest in the world.
One reason the Trump administration cut corporate rates was the wave of offshoring of American companies or relocation to countries with lower corporate tax rates, although many of its operations were in the domestic market.
Yellen will say at the conference that establishing a minimum global corporate fee will help bring stability and provide a level playing field for all countries.
“Competitiveness is more than how companies based in the United States fare against other companies in global merger and acquisition proposals,” says Yellen, according to the Axios report. “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.”
Companies were also encouraged to hide revenue abroad, something that Trump’s tax cuts also addressed by adding incentives for repatriation.
The Biden plan would require an increase in the offshore rate from 10.5% to 21%.