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| US Treasury Secretary Janet Allen © AFP=News1 |
US Treasury Secretary Janet Yellen pulled out an international credit card with the lowest corporate tax rate. This is interpreted as a move to lay the groundwork for raising the corporate tax rate, which is essential for financing the $2.3 trillion in infrastructure (infrastructure) expenditure. The goal is to make specific proposals by July at the level of the 20 major countries (G20).
◇”The 30 years of competition for the bottom of the corporate tax rate must end”
Finance Minister Yellen said on the 5th (local time) that by attending an online seminar hosted by the Chicago Council on International Affairs, setting the lowest corporate tax rate globally could end the “30 years of competition for the bottom of corporate tax rates.”
In the meantime, multinational corporations have pursued lower corporate tax rates and established ghost companies (paper companies) in tax havens such as the Cayman Islands. Countries in Europe, including Ireland, have also competitively lowered corporate taxes to meet this demand.
However, in order to end this competition, Secretary Yellon, who is responsible for the economic policy of US President Joe Biden, who took office in January, emphasized international cooperation in corporate tax rates. “Competitiveness is more than US companies have an edge over their competitors in the merger and acquisition (M&A) market,” said Secretary Yellen.
“It is competitive to ensure that the government stably operates the tax system so that it can invest in important public goods and respond to the crisis,” he said. “All citizens should bear the government finances fairly.”
Accordingly, Minister Yellen said that the global lowest corporate tax rate is being discussed at the level of the 20 major countries (G20). “The global lowest corporate tax rate for taxation of multinational corporations allows the global economy to thrive in a more equitable arena of competition,” he said.
In this regard, a U.S. Treasury official told Reuters that the goal is to come up with a specific proposal from the G20 to July.
◇ Foundation for consensus on the’increased tax’ of infrastructure resources
Yellen’s remarks on corporate tax rate cooperation came out in the midst of raising funds for the infrastructure expenditure plan. President Biden plans to raise the corporate tax rate from 21% to 28% to provide money for infrastructure investment. In addition, it plans to charge at least a 21% tax rate on foreign profits of US companies, eliminate export incentives, and increase taxes on foreign companies located in the US.
In order to reduce the risk of corporate money escaping overseas by raising corporate tax rates only in the United States, Secretary Yellen appears to have pressed international cooperation. When a lower limit on corporate tax rates is set internationally, the potential benefits that U.S. companies can take by going abroad are eliminated.
In addition, cooperation in tax increases is putting pressure on other companies around the world, not just the United States. The Wall Street Journal (WSJ) noted that international tax cooperation is “one of the Biden administration’s top priorities,” and “is not limited to US-based companies.”
But the Biden administration’s corporate tax increase was immediately faced with backlash within the Democratic Party. West Virginia Senator Joe Manchin, a key member of the Democratic Party’s center-centre, said on the 5th that the 25% corporate tax rate is preferred.
Although the Organization for Economic Development Cooperation (OECD), a group of developed countries, would welcome the US proposal to cooperate with the lower corporate tax rate, some point out that it cannot guarantee the consent of all member states.
“Countries like France and Germany may find Biden’s proposal attractive,” said Diel Bern, vice president of tax-related think tank’Tax Foundation’.