Scott Mlyn | CNBC
The US is taking a two-pronged approach towards its goal of introducing a global minimum corporate tax as negotiations with a global consortium continue, Treasury Secretary Janet Yellen said Tuesday.
The White House has set itself the goal of getting countries around the world to adopt a property tax paid by all companies to prevent companies from relocating their home operations to countries with lower tax rates.
That goal has become more urgent as the government seeks to raise taxes on US corporations. Yellen said she had been encouraged by developments in talks with other countries so far.
Along with the US tax hike, “we propose raising the global minimum tax and closing tax loopholes that allow American companies to shift profits overseas,” she told the Wall Street Journal’s CEO Council Summit.
Yellen said the US has held talks with member states of the Organization for Economic Co-operation and Development.
“We are working very actively with other countries to end the global corporate tax race,” she said. “I fear that this global race to the bottom on corporate taxes is robbing economies of the revenue they really need to invest in infrastructure, education, research and development and other things to fuel growth and business competitiveness affect. “
“So we are asking companies to pay a little more to meet the tax priorities that are equally important to their competitiveness, in a context where global interest rates will also rise,” she said.
Some countries have publicly stated that they are in favor of the global minimum tax idea, although it remains unpopular in some areas. US companies have long had “offshoring” practices in which they set up their headquarters in low-tax countries while doing much of their business domestically.
The Trump administration has cut the corporate tax rate to 21%, which President Joe Biden plans to raise to 28%. In addition, the 2017 tax cuts provided incentives for companies to repay profits they had stored overseas.
On an earlier appearance, Yellen said the tax cuts did little to stimulate investment and instead sparked stock buybacks and dividend payouts for investors.
In addition to negotiating tax levels, the government is also working to reach an agreement on how other countries tax American companies. Indeed, this is the first of two talks Yellen has termed “pillars” with nations in the Organization for Economic Co-operation and Development.
“The second pillar is about global minimum taxes, and the first pillar is about those taxes that have been levied on American companies by some individual countries,” she said. “We have made a proposal to widen the coverage of the first pillar to include not just US tech companies but the most profitable operation of large companies, regardless of industry worldwide, and we hope we can come to an agreement can on both pillars. “
Yellen said the government is looking at ways to prevent companies from deducting tax payments to tax haven nations.
Ultimately, she said US corporations will pay more taxes, but she said the proceeds are necessary to fund the expansive spending programs on the government’s agenda.
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