(Washington) Treasury Secretary Janet Yellen said on Wednesday that the tax hike on US companies that the Biden administration wants to fund infrastructure investments should encourage other countries to follow suit and halt further tax cuts.
“We are not only putting an end to the United States’ participation in this race to reduce (taxes), but the bill encourages the whole world to abandon this practice,” she stressed.
To attract companies to their territories and ensure a competitive environment for them, countries compete for corporate tax rates.
And she insisted that “this devastating tax competition will not end until large enough economies stop cutting (taxes) and accept global minimum taxes.”
Negotiations are underway on this issue in the Group of Twenty, which hopes to reach an agreement by the summer.
“We are in a position to reach an agreement that will encourage the vast majority of developed countries in the world to set a minimum tax,” Wali Ademu, second place holder in the Treasury, said on CNBC.
On the other hand, he dismisses the idea of a tax targeting digital giants only: “We have made clear to our European counterparts that we will not support a discriminatory tax against US companies, but we support taxes that ensure that companies must pay a flat rate worldwide.”
For the United States, a corporate tax increase from 21% to 28% should help fund a massive investment plan of more than $ 2 trillion over eight years in infrastructure, green energy, and technology.
Zero tax for some multinational companies
This increase will partially reverse the decrease given by Donald Trump, from 35% to 21%.
The result has been a significant drop in the tax revenue companies pay. Over the past three years, the level of corporate taxes has fallen to its lowest level since World War II: 1% of GDP, ”Janet Yellen said.
It also indicated that the additional investments promised to justify this decline had not been made, as it had the effect of encouraging other countries to follow suit.
She explained that “over the next ten years, about two billion dollars in corporate taxes will be offered outside the country because of this defective system.”
This tax cut, combined with tax breaks and legal tricks, has allowed US multinationals like Amazon to avoid paying taxes, despite huge profits.
In a typical year, about 200 companies report net profits of $ 2 billion or more. A large portion of them did not pay taxes to the federal state, ”the US Treasury Department expresses its regret in its bill, which was published on Wednesday.
So it is expected that, to prevent these big corporations from playing on tax improvement, their dividends presented to shareholders would be taxed at 15%.
While Republicans oppose the tax increases, arguing that they would hurt investment, the International Monetary Fund this week confirmed at its Spring Meetings that it is unlikely to have a significant impact.
The IMF’s Financial Fund confirmed that the increase anticipated by the Biden plan will be included in an “international agreement” supported by the International Monetary Fund, because “it is important to allow governments to obtain the necessary resources” to continue helping the most vulnerable people. Affairs Director Vitor Gaspar, Wednesday at a press conference.
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