Yellen Declares End to Trump’s Global Retreat, Eyes Tax Deal
(Bloomberg) - Treasury Secretary Janet Yellen outlined the call for a harmonized corporate tax rate across the world's major economies as part of an effort to restore global leadership and credibility to U.S. allies following the Trump-era unilateralist approach.
In her first major speech on international economic policy, Yellen marked an American return to the "global stage". She highlighted China, saying the US needed a "strong presence in world markets" to level the playing field.
The Biden government's tax proposal also marks a US return to years of discussions - led by the Organization for Economic Cooperation and Development with around 140 countries - to work out a global agreement on minimum taxes. However, the participants have not yet reached an agreement, and while most of the stakeholders support the idea of a global minimum tax, the negotiations also include a potential deal on digital taxation that has been blocked by long-standing disagreements over how to approach the problem.
"Together we can use a global minimum tax to ensure that the world economy thrives on a level playing field in the taxation of multinational corporations, promoting innovation, growth and prosperity," Yellen said in her virtual remarks to the Chicago Council on World Events.
The new multilateral approach begins with the US playing a leading role worldwide in the search for an adequate minimum corporate income tax. This is one of the proposals to increase President Joe Biden's $ 2.25 trillion in infrastructure and other spending income released last week. Yellen wants to stop what she calls the international "race to the bottom" by countries competing to attract companies with lower taxes.
Biden's plan to impose a minimum global tax of 21% on foreign profits would be more robust than many of the proposals previously discussed at the OECD. It's not yet clear whether the nearly 140 attendees will be able to close a deal within the self-imposed deadline this summer.
The Business Roundtable said in a statement on Monday evening that while its members welcomed "a level playing field for globally active US companies", the government's global minimum tax proposal "could put the US at a major competitive disadvantage".
Earlier, three Senate Democrats, Ron Wyden of Oregon, Sherrod Brown of Ohio, and Mark Warner of Virginia had proposed an alternative plan that included higher levies on offshore profits and higher penalties for companies moving income outside of the country to pay off Avoid Taxes the Internal Revenue Service. Their proposal does not call for specific tariff levels and requests feedback on the ideas as the legislature works on legislation.
Yellen's predecessor, Steven Mnuchin, stepped down from the OECD talks because he wanted the American system to be a minimum tax.
With the change of control in the White House after the November elections, Yellen has laid the foundation for the minimum tax proposal since taking office in late January, when she used her first bilateral talks with colleagues to discuss tax negotiations with France, Germany and the United Kingdom
It dropped a key demand in the Trump-era negotiations over taxing tech companies like Google and Facebook Inc. from Alphabet Inc. and lifted a barrier that had heightened transatlantic trade tensions and prevented an international agreement on minimum and digital tax issues have been combined. Yellen told her colleagues at a virtual meeting of the group of 20 tax officials in February that the US no longer has a so-called safe harbor rule that would allow US tech companies to refuse to pay such a tax overseas.
In her speech, Yellen criticized the strategy of the administration of President Donald Trump and deciphered four years when the US "isolated us and withdrew from the international order we created".
"America first must never mean America alone," she said. "A lack of global leadership and engagement makes our institutions and economies vulnerable."
This week, Yellen is attending her first meeting as Treasury Secretary during the spring IMF and World Bank meetings, which are practically this year.
During the week, she will meet with finance ministers to discuss climate change, complete the increase in IMF resources to help poor nations cope with Covid-19, Biden's Made in America tax plan, and on attend bilateral meetings, including with her Canadian counterpart.
In her speech, the CFO also urged other major economies to "continue to make strong fiscal efforts and avoid withdrawing support too soon in order to foster a strong recovery and avoid the occurrence of global imbalances".
She highlighted the Biden government's plans for sustained economic assistance, with a $ 2.25 trillion infrastructure plan following the $ 1.9 trillion pandemic relief bill signed last month. She said 130 million aid has now been sent to individuals and families.
Four years ago, Trump's newly sworn Treasury Secretary, Mnuchin, shocked American allies at the government's first international meeting with an approach so one-sided that it tended to result in a total withdrawal.
Mnuchin hardly spoke a word at his first meeting with the group of 20 finance ministers in Germany in March 2017. He spoke only once during a plenary session - to urge the group to repeal all vows to avoid protectionism.
Yellen's speech shows a major U-turn. "Credibility abroad starts with credibility at home," she said on Monday.
(Updates with Business Roundtable Statement, Senators' proposal, from paragraph 7 onwards.)
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay up to date with the most trusted business news source.
© 2021 Bloomberg L.P.
In this article:
Mention your own website in this post for Advertisement
Trump Rips 'Dumb Son Of A Bitch' Mitch McConnell At RNC Donor Event: Report
John Boehner on how history will judge presidents he’s known. Trump: ‘I don’t think very well’
Jennifer Lopez's Latest Instagram Post Is Fueling New Speculation About Her Relationship Status
Kristin Cavallari says sharing custody with ex Jay Cutler has made her a 'better mom': 'When I have them for my week, I am so incredibly present'
Las Vegas pushes to become first to ban ornamental grass
India bans Remdesivir exports as coronavirus rages on; rallies continue