April 5, 2021
Secretary of Treasury Janet L Yellen said America is strongest when it engages with the world, emphasizing that domestic action must go hand in hand with U.S. international leadership, aimed at significantly enhancing global action.
“When I was born, the United States was still recovering from the Great Depression and World War II. These tragedies cost countless lives; too many families lost nearly everything. But from the devastation we learned an invaluable lesson: the United States must not go it alone,” said Secretary Yellen during her opening remarks at a virtual event at the Chicago Council on Global Affairs on Monday.
Her speech comes as she prepares to participate in two major global finance events this week: the International Monetary Fund and World Bank Spring meetings, which kicks off today, and the G20 Finance Minister and Governor meeting taking place on Wednesday, where she, along with her counterparts are expected to discuss progress on concurring on a global corporate tax agenda, update of the G20 Action plan—the main policy tool to address and mitigate the impact of covid-19 pandemic, a global guidance that will help to shape policy response, especially on health-related initiatives as well as provide support to the most vulnerable economies during the covid pandemic economic recovery.
One of those policies Yellen said the G20 is looking at implementing to boost global economy and level the playing field for businesses is the global corporate tax agenda, which notoriously has emerged as a contentious issues in recent years as governments in developing economies increasingly claim that many multinational companies from developed economies are cheating them out of corporate tax revenue through tax avoidance. On the other hand, businesses are crying foul, saying the proposed international tax rate will put them at a competitive disadvantage.
For the United States to prosper, our neighbors too must prosper. In the modern world, recession, instability, and crime abroad find ways to wash upon our shore. Strong and stable economies abroad make us safer.
Business Roundtable, an organization which represents Chief Executive Officers of America’s top companies and largest employers, on behalf of its members expresses concerns over Yellen’s proposed global minimum corporate tax rate. The organization’s elite board of directors include Doug McMillion, Chairman, President and CEO of Walmart, Corie Barry CEO of Best Buy Co. Inc, Mary T. Barra of General Motors and Tim Cook CEO of Apple.
In a statement, President and CEO of Business Roundtable Joshua Bolten argued that the proposed international tax system threatens to subject its members to a major competitive disadvantage. “U.S. companies already face a global minimum tax on their income, known as GILTI.,” He added that “before unilaterally subjecting U.S. companies to a competitive disadvantage, the administration should secure agreement from OECD and Inclusive Framework countries on a global minimum tax that they will agree to implement on their own companies. And any U.S. minimum tax should be aligned with that agreed upon global level.”
Yellen in her speech said that while America must remains competitive, Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids. “It is about making sure that governments have stable tax systems 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,” she said.
“Recognizing that it is important to work with other countries to end the pressures of tax competition and corporate tax base erosion. We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom. 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.
This month’s G20 Finance meeting, which will be hosted by the Italian government, builds on agenda from the last meeting held in February where Yellen and her counterparts mulled scaling up international coordination efforts to tackle immediate and any potential future global challenges such as digitalization, international taxation and climate change through a stronger multilateral approach focusing on a set of core priorities that will give support to the most vulnerable economies and transition the world towards more sustainable economies and financial regulations.
“For the United States to prosper, our neighbors too must prosper,” said Yellen. “In the modern world, recession, instability, and crime abroad find ways to wash upon our shore. Strong and stable economies abroad make us safer. We will benefit if countries can maintain or create economic, social, and political conditions favorable to an open society. We will benefit if individuals around the world can pursue their aspirations, regardless of conditions of birth, and if women have truly equal rights and opportunity to be included in the economy. We will benefit if people—while retaining cultural differences—share core values of free speech, free exercise of religion, and respect for diversity.”
More importantly, she stressed, a stronger growth abroad also means a stronger economy for the U.S. “As other economies prosper, demand for U.S. exports of goods and service increase, creating jobs. When developing countries are economically successful, their growing populations and rising living standards mean a higher consumer base for the United States. In 1990, 40 percent of U.S. exports went to emerging economies. By 2020, it was 60 percent. This demand for American products creates U.S. jobs that pay better,” noted Yellen, underscoring the benefits of globalization, bilateral and global trades to Americans and the overall America’s economy.
However, she also noted that an undeniable threat from climate change poses the greatest challenge to America and the global economy.
“The biggest long-term threat the world faces [is] climate change,” warned Yellen, mincing no words as she reiterated the statement she made to lawmakers during her confirmation hearing earlier this year. “After sitting on the sidelines for four years, the U.S. is committed to doing its part. We have a narrow moment to pursue action at home and abroad to avoid the most catastrophic impacts of that crisis and to seize the opportunity that tackling climate change presents.”
Speaking further on climate change, Yellen, who will be co-chairing a newly launched G20 sustainable finance working group will work together to identify mechanisms for promoting green investments and accelerating transition to a net-zero economy, also noted that President Biden’s recently released American Jobs Plan will not only help combat climate change though investing in sustainable infrastructure, creating new green jobs, it also set out U.S.’s ambitious strategy to further cut domestic greenhouse gas emissions that set a new international standard.
“Treasury is working closely with our international partners and international organizations to implement ambitious emissions reduction measures, protect critical ecosystems, build resilience against the impacts of climate change, and promote the flow of capital toward climate-aligned investments and away from carbon-intensive investments. We are also working to ensure that climate risk is integrated into the financial system so that financial institutions, regulators, and investors can make informed decisions,” said Yellen.