Business

/

ArcaMax

Yellen declares end to Trump's global retreat, aims at tax deal

Saleha Mohsin and Christopher Condon, Bloomberg News on

Published in Business News

Treasury Secretary Janet Yellen outlined the case for a harmonized corporate tax rate across the world’s major economies, part of an effort to restore global leadership and credibility with U.S. allies following the unilateralist approach of the Trump era.

In her first major speech on international economic policy, Yellen marked an American return to the “global stage.” She singled out China, saying the U.S. needs a “strong presence in global markets” to level the playing field.

The Biden administration tax proposal also marks a U.S. return to years-long talks -- led by the Organization for Economic Cooperation and Development with about 140 countries -- to develop a global agreement on minimum levies. But participants haven’t yet reached a deal, and while most involved support the idea of a global minimum tax, the negotiations also include a potential accord on digital taxation that has been blocked by long-standing disagreements over how to approach the issue.

“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 in her virtual remarks to the Chicago Council on Global Affairs.

The new multilateral approach begins with the U.S. taking a leading role in working globally to find an appropriate minimum corporate tax, one of the revenue-raising proposals in President Joe Biden’s $2.25 trillion package of infrastructure and other spending released last week. Yellen wants to halt what she described as an international “race to the bottom” by countries competing to lure corporations with lower taxes.

Tax Talks

 

Yellen’s predecessor, Steven Mnuchin, walked away from the OECD talks because he wanted America’s system to qualify as the minimum tax.

With the change in White House control in November’s election, Yellen has been laying the groundwork for the minimum-tax proposal since shortly after taking office in late January, when she used her first bilateral talks with counterparts to discuss tax negotiations with France, Germany and the U.K.

Yellen dropped a key demand in Trump-era negotiations over taxation of technology companies such as Alphabet Inc.’s Google and Facebook Inc., lifting a barrier that had raised transatlantic trade tensions and prevented an international deal combining minimum and digital tax issues. Yellen in February told her counterparts at a virtual meeting of Group of 20 finance officials that the U.S. is no longer calling for a so-called safe harbor rule that would allow U.S. tech companies to opt out of paying such a tax overseas.

Biden’s plan to impose a 21% global minimum tax on foreign profits would be more robust than many of the proposals that have so far been discussed at the OECD. It’s not yet clear if the nearly 140 participants will be able to strike a deal by the self-imposed deadline this summer.

...continued

swipe to next page
©2021 Bloomberg L.P. Distributed by Tribune Content Agency, LLC