Yellen Calls for a Global Corporate Tax Minimum – Could She Stop Companies from Moving Overseas?
U.S. Treasury Secretary Janet Yellen called on international leaders to implement a global minimum tax in a speech to Chicago Council on Global Affairs Monday morning.
“Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity,” Yellen said.
Yellen has previously supported Biden’s stimulus plan, and now $1.9 trillion infrastructure deal whose ambitions include a worldwide corporate minimum tax. The sweeping tax rate could help to eliminate tax havens and destinations where corporations “park” their excess profits to shield them from domestic tax.
Places like the Cayman Islands and Switzerland allow companies to register within their limits with very little income tax. In the Cayman Islands, there is no corporate tax imposed, which has allowed it to have twice as many companies as people.
The fundamental dilemma with tax havens is that they are generally only available to people who can afford to not need them.
Government red tape, costs of operating outside the United States, and the overall financial burden of pretending to operate, for example, in Bermuda are hardly obstacles a small business can overcome.
What this inevitably leads to are small and family-operated businesses dutifully paying their taxes each year while corporate behemoths like Nike (which reportedly enjoyed offloading $10 billion in profits to Bermuda in 2019) dodging the IRS and cashing in.
While tax havens have been the metaphorical and physical paradise for the corporate world for decades, 2020 might be the year that finally tips the scales.
Yellen’s cries for support are against the backdrop of an increasing wealth gap and shock to the stability of governments all over the world that have never been experienced before.
The proposed increase, which would go to 21% up from 10.5%, would be centered around “making sure that governments have stable tax system that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
The comments come just as the World Bank is scheduled to hold its spring meetings beginning today and lasting through the 11th.
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