Treasury Secretary Janet Yellen on Monday will call for a minimum tax levy on companies around the world to prevent companies from moving to find lower rates.
“We are working with G-20 countries to agree on a global minimum corporate tax rate that could push the race to the bottom,” Yellen told a Chicago Council on Global Affairs conference this morning, according to a report of Axios confirmed by CNBC.
The remarks come as President Joe Biden wants to raise the corporate tax rate as a way to pay for a $ 2 billion infrastructure improvement plan.
According to the administration’s proposal, the company tax rate will increase from 21% to 28%. The increase would take place just four years after former President Donald Trump lowered the rate, which was the highest in the world at the time.
One reason why the Trump administration lowered the corporate rate was the result of U.S. companies doing offshoring, or moving their neighborhoods to countries with lower corporate tax rates, even though much of their operations happened locally.
Yellen will tell the conference that setting a minimum global corporate rate will help stability and provide a more equal playing field for all countries.
“Competitiveness is about more than the way U.S. headquarters fare against other companies in global mergers and acquisitions,” Yellen said in an Axios report. “It’s about making sure governments have stable tax systems that generate sufficient revenue to invest in essential public goods and respond to crises, and that all citizens share the burden of government funding fairly.”
Companies have also been encouraged to hide foreign revenue, something the Trump tax cuts have also addressed by adding repatriation incentives.
According to the Biden plan, the foreign exchange rate should be increased to 21% from 10.5%.