US Treasury Secretary Janet Yellen on Thursday called on lawmakers to approve President Joe Biden's global minimum tax deal, which remains stalled in the Senate.
The 2021 deal included signatories from 130 countries that pledged to establish corporate tax rates at no lower than 15 per cent.
The deal, proposed by the Organisation for Economic Co-operation and Development (OECD), also seeks to close loopholes that would have permitted multinational companies to move operations to countries offering lower tax rates.
While major economies, including all 27 European nations, the UK and Japan, signed on to the deal, the US Congress has still not approved it.
“President Biden and I continue to urge Congress to act so that the United States plays its part in the global minimum tax deal, which is currently being implemented in jurisdictions around the world to end the race to the bottom in corporate taxation,” Ms Yellen said in prepared remarks before the Senate Finance Committee.
Mike Crapo, Republican ranking member of the committee, said the Biden administration “should have deep reservations” about signing on to the deal.
“The administration again uses the OECD global tax code to justify hiking taxes on American companies at rates far exceeding those imposed by other countries,” he said.
The US corporate tax rate is 21 per cent, higher than the 15 per cent minimum inscribed in the global deal. But large companies also use tax breaks and other tools to minimise the amount they end up paying.
Mr Crapo also said the deal would not stop discriminatory taxes against US companies, “which was the sole impetus for entering these negotiations”.
The current US corporate tax rate was established under a law passed by former president Donald Trump in 2017. It expires in December 2025.
The global minimum tax would apply to companies which earn more than $812 million.
The OECD estimates it would reduce global low-taxed profit by roughly 80 per cent.
Shifted profit would also fall by roughly half, “although these estimates may take time to materialise”, the OECD said in a January report.
The global minimum tax is part of “pillar two” of the OECD's two-pillar solution to address multinational enterprises.
The first pillar gives a country greater authority to tax a company's profits that generate sales in the country but do not have a physical location there.
Ms Yellen's appearance before the Senate Finance Committee was part of congressional oversight of the Biden administration's budget plan for the fiscal year 2025.
She also used her testimony to defend the administration's tax policy on the wealthiest Americans and promote investing in programmes such as the child tax credit and the low-income housing tax credit.
