Janet Yellen promotes global minimum taxes on corporate profits
Dr.US Treasury Secretary Janet Yellen is campaigning among her G20 peers for a global minimum tax on corporate profits. Multinational corporations take the opportunity to shift part of their profits to countries with low corporate tax rates. The minister wants to put an end to this: “We are working with the G20 countries to agree on a global minimum tax for businesses that will end the 30-year competition,” Yellen said at a hypothetical event hosted by the Chicago Council in International Relations. . According to previous reports, it aims to impose a minimum tax of 21 percent.
The move is part of a broader perspective: the U.S. government plans to increase corporate taxes from 21% to 28% to partially cover recently announced infrastructure program spending of around $ 2 trillion. He fears that companies will step up efforts to shift profits to tax havens and low-tax countries. Under President Joe Biden’s predecessor Donald Trump, the corporate tax rate fell from 35% to 21%. In G20 countries, the average tax rate is 27%, as determined by the Taxation Corporation of America.
But tax rates are only half the truth. According to calculations by the US Treasury Department, the United States generated tax revenue of 2% of US economic output (GDP) before Trump’s reform, and only 1% after that. In contrast, the Organization for Economic Co-operation and Development, to which most of the G20 countries belong, generated around 3% of GDP by taxing corporate profits. According to a Treasury Department analysis, America’s tax cut hasn’t stopped companies from shifting profits.
$ 650 billion Special Drawing Rights
Yellen has now said a country’s competitiveness isn’t just reflected in how US-based companies fare in global acquisitions and mergers. The decisive factor is the stability of tax systems that provide sufficient income to invest in basic public goods and to protect their citizens from dangerous crises. After all, all citizens must make their fair contribution to government funding.
The finance minister embodied his rejection of weak competition for corporate taxes in an intense call for international cooperation. The United States will return to the leadership of multilateral organizations, Yellin said. She campaigned to help poor countries cope with the pandemic crisis. The epidemic has widened the gap between rich countries and poor countries. Rich countries should help poor countries.
Yellen has announced that it will work with the International Monetary Fund to prepare so-called special drawing rights of $ 650 billion. These property rights benefit member states in proportion to their percentage in the IMF. This would give many countries greater fiscal reserves and give poor countries in particular more cash to invest in immunization campaigns and the health system.
The Trump administration has refused to issue additional Special Drawing Rights. Many Republicans criticize that it is also providing new money to rogue countries like Iran and Russia. In addition, the measure is not targeted: rich countries receive the largest share of new money, while poor countries receive the largest share of new money. However, rich countries can lend their drawing rights to poor countries, giving them access to liquidity.