United Kingdom open to backing U.S. plans for global minimum corporate tax


The European Commission backed on Tuesday a call from U.S. Treasury Secretary Janet Yellen for a global minimum corporate tax, but said its rate should be decided in talks in the Organisation for Economic Cooperation and Development (OECD).

"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", she said Monday in a speech to the Chicago Council on Global Affairs. It was lowered from 35% under President Donald Trump. "We must seize this historic opportunity", French finance minister Bruno Le Maire, who had clashed with the previous United States administration over worldwide tax, said as he welcomed Yellen's pledge.

Both said a deal could be struck by the summer, with Mr Scholz arguing it could end a "race to the bottom in taxation".

During the week, she will meet with finance ministers to discuss climate change, finalize a boost to International Monetary Fund resources to help poor nations cope with Covid-19, Biden's "Made in America tax Plan", and attend bilateral meetings, including with her Canadian counterpart. In mainland China, the standard corporate income tax rate is 25%, with several exceptions, mainly for hi-tech companies and enterprises engaged in pollution prevention, where even lower rates are applied, which makes the country an even more competitive environment in terms of taxation.

The new multilateral approach begins with the U.S. taking a leading role in working with Group of 20 nations to find an appropriate minimum corporate tax.

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The corporate tax hikes in the USA and Britain are being presented as an effort to raise billions in revenue to help offset the cost of pandemic-related support programs and stimulus spending.

An agreement among European countries might not be easy because corporate tax rates in the 27-nation bloc vary widely from 9% in Hungary and 12.5% in Ireland to 32% in France or 31.5% in Portugal. Canada's corporate tax rate steadily declined during the period from 1980 to 2015, yet research found corporate tax revenues did not follow the same downward trend.

In an online briefing, she said the current disparities in corporate tax rates had triggered "a large amount" of tax shifting and tax avoidance, reducing the tax base of governments. Olaf Scholz and Bruno Le Maire should now take up Yellen's proposal and push for a global minimum tax rate of 21 per cent. "It is a big concern of ours".

Axios reported that Biden has tasked Yellen with convincing the business community that the massive infrastructure proposal and subsequent tax increases won't lead to inflation, a tall order by all accounts.