Treasury Secretary Janet Yellen will call for minimum taxation on businesses around the world on Monday in an effort to prevent businesses from relocating to find lower rates.
“We are working with G-20 countries to agree on a global minimum corporate tax rate that can stop the race to the bottom,” Yellen said at a Chicago Council on Global Affairs conference this morning, according to a report from Axios that was confirmed. by CNBC.
The comments come as President Joe Biden aims to raise the corporate tax rate as a way to pay for a $ 2 trillion infrastructure improvement plan.
Under 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 the rate from 35%, which was the highest in the world at the time.
One reason the Trump administration lowered the corporate rate was the rashness of US companies offshore or relocating to countries with lower corporate tax rates, even though much of their business was domestically.
Yellen will tell the conference that setting a minimum global corporate rate will contribute to stability and provide a more level playing field for all countries.
“Competitiveness is about more than how US-headquartered companies stack up against other companies in global mergers and takeover bids,” Yellen will say, according to the Axios report. “It’s about ensuring that governments have stable tax systems that provide sufficient income to invest in essential public goods and respond to crises, and that all citizens share the burden of government funding fairly.”
Businesses were also incentivized to hide their earnings offshore, something Trump’s tax cuts have also addressed by adding repatriation incentives.
The Biden plan would require an increase in the offshore tariff from 10.5% to 21%.