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Yellen says the tax plan is getting $ 2 trillion in overseas profits back

(Bloomberg) – Treasury Secretary Janet Yellen revealed a detailed sales pitch for the Biden administration’s proposed new corporate tax bill, a plan she said was fairer to all Americans and would remove incentives for businesses to move investments and profits overseas and more to raise money for critical home needs. As an extension of the tax proposals released in President Joe Biden’s $ 2.25 trillion economic package last week, the Treasury Department said the changes would put about $ 2 trillion in corporate profits in the U.S. over a decade -Tax Net Would Bring Back About $ 700 billion in federal revenue from ending incentives to shift profits overseas. In total, the additional tax revenue of about $ 2.5 trillion over 15 years would fund Biden’s eight-year spending initiative, which targets infrastructure, green investments and social networking programs that the Treasury Department said would support a larger workforce. Few large companies would be untouched, and technology giants like Apple Inc. and Microsoft Corp. would probably pay more. “Our tax revenues are at their lowest level in generations, and as they continue to decline, we will have less money to invest in roads, bridges, broadband and research and development,” Yellen told reporters during a telephone briefing, referring to research and development . “By choosing to compete in tax competition, we failed to compete for the skills of our people and the strength of our infrastructure. It’s a self-defeating competition. The Treasury Department released a 17-page report on Wednesday that is likely to serve as a roadmap for administrators and lawmakers looking to navigate Congress through the combined package of spending and tax proposals in the coming months. The Key Elements of the corporate tax plan include increasing the U.S. corporate tax rate from 21% to 28% and imposing minimum taxes on both foreign profits and domestic profits that companies report to shareholders. These changes would increase the taxes owed by corporations significantly more: Biden’s economic plan depends on the unity of the parties after winning the case The tax proposals are already meeting fierce opposition from Republican lawmakers and the backlash of some moderate Democrats. West Virginia Senator Joe Manchin has said he is opposed to corporate tax rates above 25%. With the Senate split between 50 and 50, Biden cannot afford to lose the support of a single Democratic Senator if he wants to push through part of the package. While most business groups, including the U.S. Chamber of Commerce and the Business Roundtable, have come in contrast to the tax hikes, some have acknowledged that higher corporate taxes could help fund infrastructure spending. Jeff Bezos, chief executive officer of Amazon.com Inc., said Tuesday that he would support a tax rate increase but did not provide a number. The proposal for a global minimum tax comes as the Organization for Economic Cooperation and Development is holding talks with About 140 countries, including the US, have introduced a worldwide tax on corporate profits. A global rate has yet to be set, although previous proposals have suggested rates of around 12.5%. Biden’s plan for 21% would be significantly higher and could make negotiations more difficult. Read more: Gaining Global Minimum Tax Moments with G-20 Mid-Year The Financial Report The Treasury Report contained a number of data that supports the case of the administration. U.S.-based companies with global operations paid an effective tax rate of 7.8% in 2018, the first year that former President Donald Trump’s tax cut went into effect, according to the non-partisan Joint Tax Committee. In the previous year, companies paid 16%. In all member countries of the OECD, corporate tax receipts correspond to an average of 3.1% of GDP. In the US, it’s 1%, the Treasury Department said. This represents an unfair burden on workers, made worse by Trump’s 2017 changes that cut corporate taxes, according to the Treasury Department. The report cites research showing that companies are investing more of their savings from Trump’s tax cuts in share buybacks and dividend distributions than in new investments. Profitable companies could no longer use tax breaks to completely eliminate their federal tax burdens and would have to pay at least 15% on the profits reported in their financial statements, which are known as book revenues. That levy would apply to businesses earning at least $ 2 billion, an increase over a $ 100 million threshold included in Biden’s campaign tax plan. About 180 companies have reported revenues at these levels in recent years, and about 45 of those companies would have paid the minimum tax if Biden’s plan had come into effect, the report said. The average company exposed to the tax would have an increased minimum tax liability of approximately $ 300 million per year, according to the Treasury Department. Tech GiantsApple, Microsoft, Google parent company Alphabet Inc., Facebook Inc. and Intel Corp. Realized tens of billions of euros in pre-tax income in the past 12 months with effective tax rates in the middle of the year, According to data from Bloomberg, Warren Buffett’s Berkshire Hathaway Inc. and Verizon Communications Inc. were also teens with effective tax rates of around 22% to 23 during that period % Removed key elements of Trump’s 2017 corporate tax overhaul, including ground erosion and anti-abuse tax, or “BEAT”, according to Bloomberg. The measure aimed at punishing companies that move profits overseas has been criticized for taxing some non-abusive transfers while lacking tax avoidance strategies. The Treasury Department plans to replace the BEAT with the “SHIELD”, an acronym for stop harmful inversions and end low-tax developments. This would prevent companies from withdrawing payments to their affiliates in countries with tax rates below the 21% offshore profit rate. The plan would also include additional penalties for companies attempting to relocate their headquarters to another country in order to escape the US tax net. Biden’s plan also includes removing all oil and gas-specific subsidies that are included in tax legislation, including deductions for drilling costs. Treasury estimates that about $ 35 billion will be raised over the next decade. (Updates from affected companies from the third paragraph. An earlier version corrected corporate tax revenue levels in OECD countries.) For more articles like this, please contact us at bloomberg.com. Sign up now to stay with the most trusted business news source on the To stay up to date. © 2021 Bloomberg LP

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