Treasury Secretary Janet Yellen on Monday will call for a minimum tax on companies around the world to keep companies from moving to find lower tax rates.
“We’re working with the G-20 to agree a global minimum corporate tax rate that can stop the race to the bottom,” Yellen told the Chicago Council on Global Affairs in prepared remarks. “Together we can use a global minimum tax to ensure that the world economy thrives on a level playing field in the taxation of multinational corporations, promoting innovation, growth and prosperity.”
The remarks come as President Joe Biden tries to raise the corporate tax rate to fund a $ 2 trillion infrastructure improvement plan.
According to the administration’s proposal, the corporate tax rate would increase from 21% to 28%. That increase would come just four years after former President Donald Trump cut interest rates from 35%, which was the highest in the world at the time.
One reason the Trump administration lowered the corporate rate was to tip off US corporations offshoring or relocating to countries with lower corporate tax rates even though much of their business was done domestically.
Yellen will announce to the conference that establishing a global minimum enterprise rate will help create stability and create a level playing field for all countries.
“Competitiveness is about more than how US-based companies hold up against other companies in global merger and acquisition bids,” said Yellen. “The point is to ensure that governments have stable tax systems that generate sufficient income to invest in essential public goods and respond to crises, and that all citizens share the burden of funding government fairly.”
Companies had also been encouraged to hide revenue offshore, which Trump’s tax cuts also addressed by providing additional incentives for repatriation.
The Biden plan would provide for an increase in the offshore rate from 10.5% to 21%.
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