Scott Mill CNBC
The United States is taking a two-pronged approach to its goal of applying a minimum tax to corporations worldwide as it progresses through negotiations with a global consortium, Finance Minister Janet Yellen said on Tuesday.
Getting countries around the world to introduce the lowest-level tax that all companies pay is a goal the White House has set for itself to stop companies from redirecting their domestic operations to lower-rate countries.
This goal has become more urgent as the administration seeks to raise taxes on US companies. Yellen said she has so far been encouraged by the development of talks with other countries.
Along with the U.S. tax increase, “we are proposing to raise the global minimum tax and close the loopholes in taxes that allow U.S. corporations to redirect profits abroad,”
Yellen said the United States is in talks with member states in the Organization for Economic Co-operation and Development.
“We are working very actively with other countries to put an end to what was a global corporate tax race to the bottom,” she said. “I fear that this race to the bottom of the world in terms of corporate taxes deprives economies of the revenue they really need to invest in infrastructure, education, research and development and other things to stimulate growth and also to affect corporate competitiveness. “
“So we want companies to step up and pay a little more to help deliver on fiscal priorities that are equally important to make them competitive and do so in a context where we will also see an increase in global interest “I said.
Several countries have publicly stated that they support the global idea of a minimum tax, although it remains unpopular in some quarters. U.S. companies have long engaged in “offshore” practices, where they settle in low-tax countries, even though they do much of their business inside.
The Trump administration has reduced the corporate tax to 21 percent, which President Joe Biden wants to raise to 28 percent. In addition, the tax cuts in 2017 encouraged companies to repatriate profits they kept abroad.
Speaking earlier in the day, Yellen said tax cuts do not contribute much to investment and instead cause share buybacks and dividends to be issued to investors.
In addition to negotiating the tax level, the administration is seeking an agreement on how other countries tax American companies. This is, in fact, the first of what Jelena identified as two “pillars” of the talks she has with countries in the Organization for Economic Co-operation and Development.
“The second pillar is for global minimum taxes, and the first pillar is for those taxes that have so far been collected by some individual countries from American companies,” she said. “We have made a proposal to expand the scope of the first pillar so that it is not just US technology companies, so that it is the most profitable operation of large corporations, regardless of the sector worldwide, and we hope to be able to achieve agreement of the two pillars. “
Yellen said the administration is looking for ways to discourage companies from deducting the tax payments they make to countries that have tax havens.
Ultimately, she said companies would pay more taxes in the United States, but said the revenue was needed to help fund expansionary spending programs on the administration’s agenda.
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