Treasury Secretary Janet Yellen Calls For Global Minimum Corporate Tax

Earlier this week, Treasury Secretary Janet Yellen called for the United States to support a global minimum corporate tax rate.

This coincides with President Biden's desire to raise the US corporate tax rate in order to fund his $2 trillion "American Jobs Plan".

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Global corporate tax rates have been in a race to the bottom over the years as countries attempt to attract multi-national corporations.

In fact, nine countries lowered their corporate tax rates last year.

As of this moment, the global average corporate tax rate is under 24% and falling.

The United States formerly had a corporate tax rate of 35%, though this was slashed to 21% under President Trump.

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Talks regarding a global minimum corporate tax have been ongoing within the OECD (The Organization for Economic Co-operation and Development) for some time now.

As part of the "Blueprint for Pillar Two", the international community would "introduce a global minimum tax that would help countries around the world address remaining issues linked to base erosion and profit shifting by MNEs".

Treasury Secretary Janet Yellen, as mentioned, has backed calls for a minimum tax of 21%, though she said that this rate should ultimately be decided within the OECD. Yellen has said that she is "working" with G20 countries to agree on a global corporate minimum tax rate.

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There are obviously many challenges ahead for the "global minimum corporate tax".

Would a country like Ireland, with its 12.5% corporate tax rate, be willing to move up to 21%?

Would a country like France, with its 32% corporate tax rate, be willing to move down to 21%?

Will the United States be able to pass its own corporate tax rate increase, after some Democrats have signalled their hesitance to do so?

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The "global minimum corporate tax" movement may have some momentum right now, though the actual implementation of such a plan seems like it will have many hurdles.


Filed under: General Knowledge