Yellen’s Global Tax Rate
On Monday, United States Treasury Secretary Janet Yellen called for a global minimum tax rate, an attempt to partly mitigate any negative consequences that appear from the Biden administration’s proposed corporate tax rate increase.
President Joe Biden’s proposal includes raising the corporate tax rate from 21% to 28%, imposing a 21% minimum tax on foreign corporate income, and making it more difficult for companies to shift their earnings offshore. Biden’s proposed tax increase would help fund his administration’s massive $2.3 billion infrastructure plan.
However, under the Biden administration’s proposed tax hikes, foreign companies operating overseas could be significantly more profitable than competitors in the United States. A global minimum tax will help stop foreign businesses from getting a significant advantage if the United States increases its tax rates and puts greater tax burdens on U.S. companies’ overseas earnings. In Yellen’s speech Monday, she said, “It is important to work with other countries to end the pressures of tax competition and corporate tax base erosion.”
The United States has long had more strict tax laws on its companies than other nations, but a significant disparity could lead to foreign competitors taking over U.S. companies or lead to U.S. companies relocating overseas. Although on Monday, President Biden said he is “not at all” concerned that the proposed tax hikes could cause U.S. companies to relocate overseas.
If Yellen’s proposed global minimum tax rate gets implemented, it will be a huge deal because it would cause countries to coordinate their tax systems in ways they’ve never done before.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.