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A global minimum corporate tax rate..

Summary:
Janet Yellen’s remarks yday (5-Apr-2021) attracted a lot of attention. She mentioned the need to have a global minimum tax. She started with saying “America is strongest when we engage with the world” and points the role US has played in world polity and economy: 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. In the aftermath of the destruction, the United States built strong political and security alliances that have helped keep our country safe and helped our economies flourish. We created global institutions, such as the United Nations, and financial

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Janet Yellen’s remarks yday (5-Apr-2021) attracted a lot of attention. She mentioned the need to have a global minimum tax.

She started with saying “America is strongest when we engage with the world” and points the role US has played in world polity and economy:

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.

In the aftermath of the destruction, the United States built strong political and security alliances that have helped keep our country safe and helped our economies flourish. We created global institutions, such as the United Nations, and financial institutions, such as the International Monetary Fund and World Bank, to reduce economic conflict and address global poverty. With strong U.S. leadership—and working together with our allies—we contained communism and created a dynamic world economy and growing markets for U.S. exports. America’s middle class prospered. Millions across the world were lifted out of poverty.

But over the years, new problems developed that were not properly addressed. In the push to grow our economies, we neglected our environment. As we embraced new technologies, we didn’t do enough to prepare our workers and our education systems for the changes underway. While we embraced trade as an engine for growth, we neglected those who did not benefit. And in the most recent period, when we might have adopted policies at home to face these issues and joined with our allies to address issues abroad, we isolated ourselves and retreated from the international order that we created.

Over the last four years, we have seen firsthand what happens when America steps back from the global stage. America first must never mean America alone. For in today’s world, no country alone can suitably provide a strong and sustainable economy for its people. Over time, a lack of global leadership and engagement makes our institutions and economy vulnerable.

She points to three things US needs to do:

The first objective is a stable and growing world economy that benefits the U.S. economy.

The second objective is to fight poverty and promote a more inclusive global economy that aligns with our values.

Finally, there are certain matters where we are in it together—where the challenges are global and no one country will be successful if it goes at it in isolation.

In the third she raised this point of a global minimum tax:

Another consequence of an interconnected world has been a thirty-year race to the bottom on corporate tax rates. 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.

President Biden’s proposals announced last week call for bold domestic action, including to raise the U.S. minimum tax rate, and renewed international engagement, 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.

Hmm..

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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