Treasury Secretary Janet Yellen said she is confident that Congress will include provisions for a global minimum tax on corporate profits in reconciliation legislation, days after the United States and 135 other nations endorsed the levy to combat tax-cutting.
Each country that signed the deal must pass legislation to enact the measure, which is aimed at limiting corporations’ ability to lower their tax bills by shifting profits to the lowest-tax jurisdictions globally.
“I am confident that what we need to do to come into compliance with the minimum tax will be included in a reconciliation package. I hope that it will be passed and we will be able to reassure the world that the United States will do its part,” Yellen told ABC News’s “This Week” program.
Congressional Democrats are currently hammering out a so-called reconciliation bill that would substantially raise federal spending on social safety-net programs and on fighting climate change.
Low-tax nations, including Ireland and Hungary, that had long resisted the minimum-tax deal finally endorsed it last week, bringing it closer to fruition after six years of global diplomatic bargaining. All members of the Group of 20 nations and the Organization for Economic Cooperation and Development (OECD) have signed on.
The rule requires countries to set a minimum tax of 15 percent on the profits of companies with annual revenue above 750 million euros.
The OECD, which led discussions on the deal, said it would allow countries to collect around $150 billion in new revenue annually.
A recent report found that corporations are shifting $1.38 trillion worth of profit each year into havens that charge little to no tax, causing the governments where that profit is actually earned to miss out on $245 billion in annual revenue.
Yellen said the deal would curb the global “race to the bottom” through which countries have cut their tax rates ever lower to attract businesses to set up headquarters and hire workers.
The tax-cutting spree has deprived many countries of the “resources we need to invest in our people and our economies,” she said. The deal “is really something we need to make globalization work and to make it work for American workers,” Yellen added.
Some critics said the agreement, which updates the 3,000-odd bilateral treaties that regulate global taxation, doesn’t do enough for the world’s poorest countries.
The 15 percent rate is too low and “will neither curb profit shifting effectively, nor provide substantial revenues to more than a handful of OECD member countries,” Alex Cobham, chief executive at the not-for-profit Tax Justice Network, said in an emailed statement. “Everyone else has been left out, especially lower-income countries which lose the greatest share of their current tax revenues to corporate tax abuse.”