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Expiries for Apr13 NY cut 1000ET (Source DTCC)

GERMAN DATA

ZEW Expectations Sentiment Fell in April

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U.S. Treasury Secretary Janet Yellen Wednesday released a report proposing to raise USD2.5 trillion in tax revenue over 15 years, aiming to pay for President Joseph Biden's infrastructure plan, reduce inequality and curtail corporate profit shifting.

The report, which focuses on corporate tax reform and reforming tax incentives, calls for increasing the corporate rate to 28% from 21% currently, raising global intangible low-taxed income (GILTI), enacting a 15% minimum tax on book income of large companies, increasing enforcement of tax avoidance, and aims to eliminate profit shifting by U.S. multinational companies with proposals to repeal and replace the Base Erosion and Anti-Abuse Tax (BEAT).

According to Treasury officials, the proposals would raise about USD2.5 trillion in tax revenue over 15 years, with more revenue generated earlier on, and fully paying for the investments in Biden's infrastructure plan over a 15-year period and continuing to generate revenue on a permanent basis.

REFORM NEEDED

On a call with reporters, Yellen said reforming the corporate tax system is needed in part because of President Trump's Tax Cut and Jobs Act that reduced rates to 21%. "Over the next 10 years roughly USD2 trillion of the corporate tax base will flow out of the country because of this broken system."

The report describes President Biden's Made in America tax plan, the goal of which is to make American companies and workers more competitive by eliminating incentives to offshore investment, substantially reducing profit shifting, countering tax competition on corporate rates, and providing tax preferences for clean energy production.

SCRUTINY

The proposals, however, are sure to come under scrutiny on Capitol Hill from Republicans and Democrats. Some moderate Democrats have released their own proposals and have criticized Biden's move to raise corporate taxes to 28%, instead preferring 25%.

Highlights of the report:

  • Raising the corporate income tax rate to 28 percent
  • Strengthening the global minimum tax for U.S. multinational corporations, doubling GILTI rate
  • Reducing incentives for foreign jurisdictions to maintain ultra-low corporate tax rates by encouraging global adoption of robust minimum taxes
  • Enacting a 15% minimum tax on book income of large companies that report high profits, but have little taxable income
  • Replacing incentives that reward excess profits from intangible assets with more generous incentives for new research and development
  • Replacing fossil fuel subsidies with incentives for clean energy production
  • Ramping up enforcement to address corporate tax avoidance