The United States is working with G20 nations on a global minimum tax for companies, Treasury Secretary Janet Yellen said Monday. It’s part of President Biden’s corporate tax plan that also includes raising the corporate tax rate in the United States and setting minimum taxes on U.S. companies’ foreign earnings.
Yellen said reaching an agreement would move the world away from what she called a 30-year race to the bottom.
“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,” Yellen said.
Yellen’s remarks came during a speech Monday before the Chicago Council on Global Affairs as the International Monetary Fund and World Bank Group kick off a new round of spring meetings this week. This is Yellen’s first participation in the meetings as Treasury secretary.
While the Biden administration is calling for a global minimum tax, a Treasury official would not give a specific number for what the target minimum is, only saying that the U.S. is looking to reach a comprehensive agreement on corporate taxation with other major economies. The G20 is aiming to reach a political agreement by July.
The Treasury official acknowledged that some countries may not agree to a deal but argued there are a number of provisions in the Made in America Tax Plan to help address tax havens and the U.S. is working with major partners as well. The tax proposal is part of the president’s American Jobs Plan, unveiled last week, which would pay for infrastructure including roads, bridges and airports but also affordable housing, broadband and other provisions. As part of his plan, the president is also calling for upping the minimum tax on U.S. multinational corporations from 10.5% to 21%, which would be calculated on a country-by-country basis to help hit profits in tax havens.
According to the Tax Foundation, the average corporate tax rate across 177 different jurisdictions in 2020 was just under 24%. The regional average was lower in Europe – just under 20% — and higher in in Africa, at 28.5%. With the Trump 2017 tax law, the U.S. brought its corporate tax closer to the average, from 35% to 21%.
Yellen has spent the past week briefing House and Senate leaders on Biden’s tax plan. According to the administration, the tax plan would raise more than cover paying for the $2 trillion infrastructure plan over 15 years, in part by reversing some of the Trump administration tax cuts. Yellen will also brief House Democrats on Tuesday.
On Monday, Yellen also laid out other global cooperation priorities including addressing climate change, fighting inequality, working with partners to advance the global economic recovery from the pandemic, and making sure the world’s poorest countries have access to vaccines and financing.
The Treasury secretary said the Biden administration is committed to restoring U.S. leadership to help make the world economy stronger and advance American interests, stating the U.S. needs a strong presence in the global market and would cooperate with willing partners, but she did not shy away from the challenges, specifically China.
“Our economic relationship with China, like our broader relationship with China, will be competitive where it should be, collaborative where it can be, and adversarial where it must be,” Yellen said.
During Monday’s speech, Yellen highlighted the sharp shift from the previous administration’s approach on the world stage, saying America is strongest when it engages with the world.
“Over the last four years, we have seen firsthand what happens when America steps back from the global stage,” Yellen said. “America first must never mean America alone.”