Yellen pledges U.S. international cooperation, calls for global minimum tax

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Yellen pledges U.S. international cooperation, calls for global minimum tax

Washington: US Treasury Secretary Janet Yellen said on Monday she was working with G20 countries to agree a global minimum corporate tax rate and promised that restoring US multilateral leadership would strengthen the global economy and advance US interests.

In a speech ahead of his first spring meetings of the International Monetary Fund and World Bank as Treasury chief, Yellen signaled stronger U.S. engagement on issues ranging from climate change to human rights in through the erosion of the tax base.

A global minimum tax proposed by the Biden administration could help end “a thirty-year race to the bottom in corporate tax rates,” Yellen said at an online event hosted by the Chicago Council on Global Affairs.

The proposal is a key pillar of President Joe Biden’s $2 trillion infrastructure spending plan, which includes raising the U.S. corporate tax rate to 28% while eliminating certain deductions associated with offshore profits. .

Without a global minimum, the US would again have higher rates than a number of other major economies, tax experts say, while the US proposal could help kick-start talks for a tax deal between the majors. savings.

World Bank President David Malpass said on Wednesday that finance leaders from the Group of 20 major economies would discuss global tax issues, including for digital services, adding that international attitudes were moving away from continued tax cuts. .

“Taxes are important for development, and it’s important for the world to get it right,” Malpass told CNBC television.

Separately, a group of Democratic senators unveiled a legislative proposal to reverse parts of former President Donald Trump’s 2017 U.S. tax cuts.

New Attitude

Yellen also said she would use the IMF and World Bank meetings this week to advance discussions on climate change, improve access to vaccines for poor countries and push countries to do more to support a strong global recovery after the coronavirus pandemic.

“We’ll be better off if we work together and support each other,” Yellen said.

His more cooperative approach contrasts sharply with the “America First” approach of his predecessor in the Trump administration, Steven Mnuchin. She backed a $650 billion increase in IMF currency reserves that Mnuchin opposed last year, and said she would work with international institutions and partners on carbon reduction targets. .

Mnuchin had regularly opposed any reference to climate change in the G20 and other communiqués from major multilateral gatherings.

Yellen also dropped a key Mnuchin demand in international tax negotiations – a provision that would allow big US tech companies to opt out of any new rules on taxing digital services.

Pressure on tax havens

The new Treasury chief said it was important to “end the pressures of tax competition” and ensure that governments “have stable tax systems that generate sufficient revenue in essential public goods and respond to the crises, and that all citizens equitably share the burden of financing the government”. .”

Separately, a US Treasury official told reporters it was important to have the world’s major economies on board with a global minimum tax to make it effective, but did not specify how many countries were needed for that. .

The official said the United States would use its own tax laws to prevent companies from shifting profits or residency to tax havens and would encourage other major economies to do the same.

The Biden plan proposes a minimum corporate tax rate of 21%, coupled with the elimination of exemptions on income from countries that do not enact a minimum tax. The administration says the plan will discourage the transfer of jobs and profits overseas.

Yellen said in his remarks that while advanced economies had managed to sustain their economies during the COVID-19 pandemic, it was too early to declare victory and more support was needed to ensure low-income countries had access to vaccines. .

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