Fri, Apr 09, 2021 page10

• Tax plan to recoup US$2tn, Yellen says

  ‘SELF-DEFEATING’: In promoting the plan to pay for Biden’s spending initiative, Yellen said that the US had too long focused solely on low taxes, while ignoring infrastructure

  • Bloomberg
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  US Secretary of the Treasury Janet Yellen on Wednesday unveiled a detailed sales pitch for US President Joe Biden’s proposed new corporate-tax code, a plan that she said would be fairer to all Americans, remove incentives for companies to shift investments and profit abroad, and raise more money for critical needs at home.

  Expanding on the tax proposals released last week in Biden’s US$2.25 trillion economic package, the Treasury said that over a decade the changes would bring back about US$2 trillion in corporate profits into the US tax net, with about US$700 billion in federal revenue streaming in from ending incentives to shift profits overseas.

  All told, the extra tax take of about US$2.5 trillion over 15 years would pay for Biden’s eight-year spending initiative, which is aimed at infrastructure, green investments and social programs that would support a larger labor force, the Treasury said.

  

  US President Joe Biden meets US Secretary of the Treasury Janet Yellen at the White House in Washington on Jan. 29.

  Photo: Reuters

  Few major corporations would be untouched, with tech giants such as Apple Inc and Microsoft Corp likely to pay more.

  “Our tax revenues are already at their lowest levels in generations, and as they continue to drop lower we will have less money to invest in roads, bridges, broadband and R&D [research and development],” Yellen told reporters during a telephone briefing. “By choosing to compete on taxes, we’ve neglected to compete on the skill of our workers and the strength of our infrastructure. It’s a self-defeating competition.”

  The Treasury released a 17-page report that will likely serve as a road map for administration officials and lawmakers seeking to navigate the combined package of spending and tax proposals through the US Congress in coming months.

  The key elements of the corporate tax plan include raising the US corporate rate to 28 percent from 21 percent, and imposing minimum taxes on foreign earnings as well as the domestic profits that corporations report to shareholders, changes that would significantly increase the taxes companies owe.

  The tax proposals already face sharp opposition from Republican lawmakers and pushback from some moderate Democrats.

  With the Senate split 50-50, Biden cannot afford to lose the support of a single Democratic senator if he wishes to push through any portion of the package.

  While most business groups have come out in opposition to the tax increases, some have acknowledged that there could be benefits from higher corporate taxes to fund infrastructure spending.

  Amazon.com Inc CEO Jeff Bezos on Tuesday said that he would support a tax-rate increase, but did not specify a number.

  The proposal for a global minimum tax comes as the Organisation for Economic Co-operation and Development (OECD) is managing talks with about 140 countries, including the US, on establishing a worldwide levy on corporate profits.

  A global rate has yet to be decided, although prior proposals had suggested rates at about 12.5 percent. Biden’s plan for 21 percent would be significantly higher and could complicate negotiations.

  The Treasury report featured a raft of data to support the administration’s case.

  US-based companies that operate globally collectively paid a 7.8 percent effective rate in 2018, the nonpartisan Joint Committee on Taxation said.

  The year before, corporations paid 16 percent. Across member countries of the OECD corporate tax revenues are equivalent to an average 3.1 percent of GDP. In the US, it is 1 percent, the Treasury said.
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