“Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen told the Chicago Council on Global Affairs in her first official remarks as treasury secretary.
Speaking ahead of this week’s virtual spring meetings of the International Monetary Fund (IMF) and World Bank, Yellen touched more broadly on the US’s role in the post-pandemic global economic recovery.
Yellen’s remarks in favour of a global corporate tax rate come on the heels of President Joe Biden’s $2.25 trillion infrastructure plan, which was unveiled last week.
Biden plans to pay the bill by hiking taxes on American companies from 21 percent to 28 percent – still well below the 35 percent they were in 2017, when then-President Donald Trump slashed them.
American firms currently pay roughly 13 percent on offshore earnings, and Biden is seeking to raise the global minimum tax rate to 21 percent.
“We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom,” Yellen said, referring to the phenomenon of firms fleeing high-tax-rate economies to set up shop in low-tax economies.
Critics of the proposal say a global minimum corporate tax rate will harm workers, who will feel the pain if corporations are forced to shell out more cash.
“It is hard to see how raising the corporate income tax, the burden of which will be ultimately shouldered by workers and shareholders, will do to help with inequality,” Veronique de Rugy, senior research fellow at the libertarian-leaning Mercatus Center at George Mason University in Virginia, told Al Jazeera.
“Also, raising corporate costs will lead to less investment in fixed assets and that helps no one considering the private sector is the driver of ownership in infrastructure and investment in infrastructure,” she added.
Biden’s proposal would raise the amount of money collected from corporations by 38 percent, according to the Cato Institute, a libertarian-leaning think-tank based in Washington, DC.
Cato’s director of tax policy studies warned that raising the tax rate in the US will cause American corporations to move their profits and investments abroad and slash costs.