US Treasury Secretary Yellen says global minimum corporate tax rate is needed

She will attend meetings with the IMF and World Bank this week

US Treasury Secretary Janet Yellen said on Monday that she is working with G20 countries to agree on a global corporate minimum tax rate to end a "30-year race to the bottom on corporate tax rates".

The global minimum tax is a pillar of President Joe Biden's $2 trillion infrastructure spending plan, which calls for an increase in the US corporate tax rate to 28 per cent.

Without a global minimum, the US would again be at a disadvantage compared to some other major economies with lower tax rates, analysts said, with US commitment helping to jump start negotiations for a tax deal with other countries.

Ms Yellen, speaking to the Chicago Council on Global Affairs, said she would also use her participation in International Monetary Fund and World Bank annual meetings this week to advance discussions on climate change, improve vaccine access and encourage countries to support a strong global recovery.

The Treasury chief said it was important to "end the pressures of tax competition" and make sure governments "have stable tax systems that raise sufficient revenue in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government".

Separately, a US Treasury official told reporters that it was important to have the world's major economies on board with a global minimum tax to make it effective.

The official said the US would use its own tax legislation to prevent companies from shifting profits or residency to tax-haven countries and would encourage other major economies to do the same.

The Biden plan proposes a 21 per cent minimum corporate tax rate, coupled with eliminating exemptions on income from countries that do not enact a minimum tax. The administration said the plan will discourage the shifting of jobs and profits overseas.

Ms Yellen said that while advanced economies had successfully supported their economies through the Covid-19 pandemic, it was too early to declare victory, and more support for low-income countries to gain access to vaccines was needed.

"I am urging our partners to continue a strong fiscal effort and avoid withdrawing support too early to promote a strong recovery and help avoid the emergence of global imbalances."