IMF advocates for a global minimum corporate tax

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IMF advocates for a global minimum corporate tax

Fund Chief Economist Says Differences in National Rates Lead to Tax Evasion

The International Monetary Fund has long advocated a global minimum corporate tax, IMF chief economist Gita Gopinath told reporters on Tuesday, calling tax evasion a major problem for the global economy.

According to Gopinath, the current differences in national corporate tax rates have caused a “high volume” of tax shifting and tax evasion, which has reduced the tax base on which government revenues depend to fund necessary economic and social spending.

“This is a serious matter of concern,” Gopinath told reporters during an online briefing. “We are very supportive of the introduction of a global minimum corporate tax.”

French Finance Minister Bruno Le Maire said on Tuesday that a global agreement on cross-border taxation is within reach and welcomed a pledge by US Treasury Secretary Janet Yellen to work towards a global minimum corporate tax rate.

Gopinath said the IMF has no position on the optimal level of such a tax rate and added that governments will need to replenish their coffers after huge spending on fighting the COVID-19 pandemic and mitigating its economic impact.

“Hopefully they will move towards a more inclusive, sustainable, green economy, and that will require measures in both income and expenditure,” she said, adding that each country will have to carefully adapt its own actions to the tax front.

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Gopinath also said the IMF is still studying the Biden administration’s proposal to raise the corporate tax rate to 28 percent. However, she noted that the decision by the previous Trump administration to cut this tax rate from 35 percent to 21 percent in 2017 had less impact on investment than expected.

US President Joe Biden on Monday noted that there was no evidence that a seven percentage point increase in the corporate tax rate would drive businesses abroad.

White House spokeswoman Jen Psaki said the 28 percent rate is the lowest since World War II.