Janet Yellen to call for unified global corporate tax rate

[Hydrogen]

Janet Yellen will use her first major address as Treasury secretary to argue for a global minimum corporate tax rate, Axios has learned, as she makes the case for President Biden’s plan to raise U.S. corporate taxes to fund his $2 trillion+ infrastructure plan.

Why it matters: Convincing other countries to impose a global minimum tax would reduce the likelihood of companies relocating offshore, as Biden seeks to increase the corporate rate from 21% to 28%.

• “Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen will say today in a speech to the Chicago Council on Global Affairs, according to an excerpt of her prepared remarks obtained by Axios.
• "It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government."
• "We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom."

The big picture: President Trump lowered the U.S. rate from 35% to 21%, arguing that U.S. companies were at a global disadvantage and were being incentivized to relocate offshore.

• The average corporate rate in the G7 is 24%, with some nine countries recently lowering their corporate rate, according to the Tax Foundation, a conservative tax group.
• Biden’s plan would also raise the international minimum rate for foreign profits from U.S. companies from 10.5% to 21%, which would still be lower than the 28% domestic corporate rate.

Driving the news: Biden has tapped five Cabinet secretaries to explain — and sell — his plan to the American public, including Transportation Secretary Pete Buttigieg, Energy Secretary Jennifer Granholm, Housing and Urban Development Secretary Marcia Fudge, Labor Secretary Marty Walsh and Commerce Secretary Gina Raimondo.

• Yellen’s task is to make the international case. Her speech also is designed to set the tone for the annual spring International Monetary Fund and World Bank meetings in Washington, which will begin virtually this week.

Between the lines: Biden has been relying on Yellen to convince the business community and reassure Wall Street that his $2 trillion+ infrastructure proposal, on top of his $1.9 trillion stimulus package, won’t lead to inflation.

• Now he’s deploying her to convince international finance ministers and central bankers that the world’s biggest economies need to act in concert on corporate rates to avoid a race to the bottom.

Go deeper: Yellen will also challenge the world’s economic powers to focus on climate change and on ways to improve vaccine access for the world’s poorest countries.

• She will call for $650 billion in new “Special Drawing Rights” — essentially lines of credit at the IMF that can help developing countries access more U.S. dollars.
• The Trump administration was skeptical of new SDR allocations and many congressional Republicans are still opposed.

The bottom line: By trying to convince other countries to impose a global minimum tax, Yellen is acknowledging the risks to the American economy if it acts alone in raising corporate rates.

• “Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity,” she will say.

https://www.axios.com/janet-yellen-global-minimum-tax-rate-51c7395b-e46a-4a5c-b18b-bdcf5d8bd352.html

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In preparation for the Biden's administration planned hike of the US corporate tax from 21% to 28%. Janet Yellen will propose G20 nations coordinate to legislate a global corporate tax rate to prevent amazon and others from moving operations from the USA to other nations with lower corporate taxes.

This conflict is a macrocosm of current events. Where Elon Musk and tesla fled high taxation california for low taxation texas. States like new york and california have hemorrhaged a steady outflux of residents and business to states with lower taxes like florida over the last few years.

There is a question of whether countries like puerto rico would support a planned global corporate tax. Many nations could stand to lose significantly if they were forced to raise corporate taxes. Low corporate taxes are how some countries attract business and residents to invest in their regions. Would they be willing to part with some of their key economic and financial advantages simply for the sake of punishing US corporations like amazon with higher taxes?

[bitmover]

In preparation for the Biden's administration planned hike of the US corporate tax from 21% to 28%. Janet Yellen will propose G20 nations coordinate to legislate a global corporate tax rate to prevent amazon and others from moving operations from the USA to other nations with lower corporate taxes.

Trump is a very weird person and made some bad decisions, but here we see how much good he made reducing taxes...

I think any "unified global tax rate"  would be terrible, and specially good for China. They will not follow those rules and will get benefits from it.

Those global pacts usually also hurt the sovereignty of the countries, which won't be able to attract companies when they need to create more jobs, neither get more money from taxes when they need...

My 2 cents, I think the less rules, the better. Governments world wide already make so many rules, we don't need a "central government" with more rules to all of them.

[Sithara007]

No one really cares about the walking fossil Janet Yellen and her stupid ideas. A few weeks earlier, she wanted the government to "curtail" cryptocurrency. Once again, no one took her seriously. The idea of dictating other countries on their tax rates is quite stupid. There are countries such as the UAE and Bahamas where the corporate tax rate is 0%. These countries don't want to increase the tax rate, as the companies will have no reason to set up their offices there if they do that.

I guess Yellen is in a state of panic. She realizes that the proposal to increase corporate tax from 21% to 28% is going to do a lot of damage. She wants to limit that by forcing everyone else to raise their taxes. But sadly for her, things don't work like that in global economy.

[Coyster]

The United States of America is a world power country, but even at that, it's not possible for them to influence other countries to follow their tax policy, every country fixes their tax rate for their best interest, thus if the U.S. feels an increase from 21% to 28% is for the best, then they should go ahead with it alone; Yellen and Biden are only seeking a "united global corporate tax rate" cause they know it's a bad policy, and that if it's taken by only the United States, it'll hurt them and play into the hands of (favor) other countries.

Having said that, they can only manage to get a few of their allies to go along with this policy, but if they are envisaging it on a 'global' scale, then it's not possible, that's even the more reason I think they'll forfeit this tax increase, or else, their competitors in the global economics that would definitely not follow this policy (like China) could allure businesses away from the U.S. and in years to come overtake them as the country with the best economy.

[avikz]

That's a deadly move and could prove very costly for US. The rate of taxes are different in different countries and that's why many countries choose to open their offices in developing countries like India, China or Philippines. Because where the labor is cheap, companies won't mind paying a little extra corporate taxes to the government. Now if the US government calls for a unified corporate tax rate across the world and if all countries agree to do that, that will be the end of industrialization in US. Every company then inevitably, move to the developing countries like India, China, Philippines or even South Africa because they can enjoy cheap labor (1/4th or even 1/5th of US) and same corporate tax. That will help the companies to save more money and increase their profitability. Us companies will probably have a small office in US as a registered office but the majority of their workforce will work from the developing countries. I am sure Biden will not approve of such move if he is intelligent enough.

[DooMAD]

I am sure Biden will not approve of such move if he is intelligent enough.

It's his move by the sounds of it.

Now if the US government calls for a unified corporate tax rate across the world and if all countries agree to do that, that will be the end of industrialization in US. Every company then inevitably, move to the developing countries like India, China, Philippines or even South Africa because they can enjoy cheap labor (1/4th or even 1/5th of US) and same corporate tax.

But every company can already do that, though.  There's a larger incentive for them to do it while other places have lower tax.  If anything, it helps the US if other nations raise their corporation tax.

[bittraffic]

This is when they know the limit of the jurisdictions they have in every country, they think they can just dictate something and everyone will follow. And what would they now do if other country doesn't care about this? 

Other countries are purposely making the taxes low to attract investors and making companies establish in their country. China is just one of them. I don't think China will take part in this.

[Cnut237]

Many nations could stand to lose significantly if they were forced to raise corporate taxes. Low corporate taxes are how some countries attract business and residents to invest in their regions. Would they be willing to part with some of their key economic and financial advantages simply for the sake of punishing US corporations like amazon with higher taxes?

Yes, exactly. There is zero chance of getting an international consensus on this... beyond setting the 'minimum' at some absurdly low level that is absolutely meaningless.
Countries are terrified of a flight of capital if they increase their taxes... this is I believe a myth perpetuated by those companies and individuals that would be affected. "Don't tax us, or we'll leave!" is an empty threat.

[davis196]

USA cannot influence any country in the world to raise it's corporate tax.This is ridiculous.
I want the major corporations to pay higher taxes,but a global minimum corporate tax isn't the solution.
USA must remove all the "hidden doors" in the tax legislation,so all the big companies should stop legally avoiding tax payments.This would be a way better policy,rather than trying to raise the corporate tax or trying to convince other countries to raise their taxes.

[DooMAD]

Lots of people seem to be stating the obvious here.  Clearly it's not realistic to think that every country will play along.  But think it through.  If the US is going ahead with their own increase regardless, then there are literally no downsides in attempting to convince other countries to do it too.  Every nation that does raise theirs is a bonus.

I swear most of the participants in the thread are simply venting because they despise Biden/Yellen or progressive policies in general.  You can argue the pros and cons of the tax rate itself, but you can't dispute the distinct lack of negatives if they can reach an agreement and work with other countries.

[Vishnu.Reang]

Yellen seems to have lost her sanity, which is not very surprising given her advanced age. Biden should be careful in selecting these 70 plus and 80 plus people for key posts, as they may not be having mental capability to make important decisions. The demand that other nations should also raise the corporate tax is not just ridiculous, but laughable as well. Why should foreign nations align their tax rates with that of the United States?

[ReiMomo]

Too entitled to propose these types of ideas. I think the best thing to make the economy great again is to enhance financing with better rates, not to increase tax. I find it stupid to increase corporate tax alone, of course making all countries calibrated is much worst. I don’t think this will work.

I highly understand that corporations might be earning more, but the stress, time, and risk they take are somehow different from normal people. If that’s the case, they would choose to be a normal person instead of giving the best out of their businesses.

[franky1]

getting g20 countries to apply a unified corporation tax rate wont change anything

the companies will just have a HQ in one of the other 170 countries
yes they will operate in america and G20 countries but run them as franchises where their 'profit' gets transported to the non G20 countries as 'management fee's'.. thus have no 'profit' within the G20 and thus no corporation tax to pay

its how companies do it already and nothing will change

what needs to happen is to actually do a proper sales tax. where companies have to hand over tax from the sales they make within the country before its syphoned off or diluted by 'hidden costs'

UK has a sales tax(VAT) of 20% .. US has under 8% sales tax.. and thats where the treasury deficit is being hit the most

raising corporation tax solves nothing due to all the tax loopholes
biden should raise the sales tax

and no its not going to cause a large change in product sales prices. as corporations should be paying 20%+ anyway.. but this way they have to pay it. and not be able to syphon/dilute their tax bill using loopholes

[Darker45]

• Now he’s deploying her to convince international finance ministers and central bankers that the world’s biggest economies need to act in concert on corporate rates to avoid a race to the bottom.

I believe this is founded upon a wrong premise. There is something terribly wrong with this. There is no race to the bottom among countries here. There is only a race to the bottom between the US and time.

If I may interpret this, I would say the US, more than the rest, is now being seriously threatened that other countries have more to offer in terms of corporate tax incentives and benefits that huge companies are enticed to let go of the US and start operating somewhere overseas.

To me, this is an attempt of the US to stifle global competition between countries at least as far as corporate tax rates are concerned. Why should other countries, especially the much poorer ones, fall for this trap when, in the first place, they are setting low corporate tax rates in order to attract foreign investors?

There is a question of whether countries like puerto rico would support a planned global corporate tax.

Last I heard Puerto Rico is still part of the United States.

[magneto]

It does make sense, but not in the way that Yellen envisions it.

It is the US and other advanced economies who needs to lower their corporate tax rates in order to converge with the rest of the world. Their cost of doing business is simply too high for any major startups to launch there. Unfortunately the pool of talent in the U.S. means that they can get away with charging these high corporate tax rates, but I suspect not for long until major firms start moving offshore too (already happened with a bunch of them).

Instead of blaming the competition, how about reflecting internally for once and adjusting your policy accordingly?

[Sithara007]

It does make sense, but not in the way that Yellen envisions it.

It is the US and other advanced economies who needs to lower their corporate tax rates in order to converge with the rest of the world. Their cost of doing business is simply too high for any major startups to launch there. Unfortunately the pool of talent in the U.S. means that they can get away with charging these high corporate tax rates, but I suspect not for long until major firms start moving offshore too (already happened with a bunch of them).

Instead of blaming the competition, how about reflecting internally for once and adjusting your policy accordingly?

Completely agreed. Janet Yellen seems to have lost her mental balance and that may be the reason why she is making such absurd statements. Take this - the American government increases the corporate tax in their jurisdiction from 21% to 28% and then orders the other countries to do the same. What do they think they are? The days of colonialism are over, and the other countries don't need to listen to deranged people like Yellen. If the regime is worried that more and more companies may move abroad due to high taxes, then they need to decrease them. On the other hand they have gone for a tax increase when the companies are getting whacked by the pandemic and the biggest tax evader (Jeff Bezos) is supporting the move.

[Anonylz]

You can not call for a global unified corporate tax rate when you are not fully aware of the economic state of other countries,  there are many countries who's economic are in a bad state and needs the support of advanced countries like the USA for continuous survival, how do you tell such countries to increase tax rate from 21% to 28%, maybe with the 21% tax most companies already producing at loss, some must have fold up and seek better alternatives elsewhere,
I don't see many countries accepting this call, otherwise that will mean a deliberate economic self destruction. The earlier they forfeit this ridiculous idea the better for everyone.

[Lucius]

getting g20 countries to apply a unified corporation tax rate wont change anything
the companies will just have a HQ in one of the other 170 countries
yes they will operate in america and G20 countries but run them as franchises where their 'profit' gets transported to the non G20 countries as 'management fee's'.. thus have no 'profit' within the G20 and thus no corporation tax to pay

I'm not sure if this proposal was part of the promise of the new American president, but I think it's just ordinary populism that could very easily end up as a proposal to increase the minimum working hour to $15, which I don't think has passed. Even if this proposal is accepted by all G20 members, companies will find a way out and outwit the system again, no matter how it was set up.

It seems to me that the US wants to create an awkward situation for itself, and for all G20 members - as you say, there are 170+ more destinations that will be very happy to provide shelter for more favorable taxes.

[Mauser]

You can not call for a global unified corporate tax rate when you are not fully aware of the economic state of other countries,  there are many countries who's economic are in a bad state and needs the support of advanced countries like the USA for continuous survival, how do you tell such countries to increase tax rate from 21% to 28%, maybe with the 21% tax most companies already producing at loss, some must have fold up and seek better alternatives elsewhere,
I don't see many countries accepting this call, otherwise that will mean a deliberate economic self destruction. The earlier they forfeit this ridiculous idea the better for everyone.

I agree, it's just not feasible to create a global unified tax scheme at the moment. Countries are just to different. Sure the USA is hurting when their companies keep money overseas but there is no real alternative at the moment. I would never expect small countries to change their tax laws to help USA. For example Ireland, a very small country that has no real exports. There is no chance this country could survive on its own. They need their low tax rates so companies stay in Dublin. One address is the home to 10,000+ companies, most of them just shell companies. But still,its very important for these small countries.

[Gozie51]

You can not call for a global unified corporate tax rate when you are not fully aware of the economic state of other countries,  there are many countries who's economic are in a bad state and needs the support of advanced countries

This makes that call invalid from inception already. Every country is peculiar and their financial strength are not the same. You can't compare the developed nations to the less developed where the government is corrupt and taxes are even evaded. A unified tax system is not visible because I don't is the proper call now, that is not what the world needs. The world needs good government, economy, employment, low inflation rate, good condition of life and not unified tax structure.