Yellen Calls for Global Minimum Corporate Tax Rate
Treasury Secretary Janet L. Yellen made the case on Monday for a global minimum tax, kicking off the Biden administration’s effort to help raise revenue in the United States and prevent companies from shifting profits overseas to evade taxes.
Ms. Yellen, in a speech to the Chicago Council on Global Affairs, called for global coordination on an international tax rate that would apply to multinational corporations regardless of where they locate their headquarters. Such a global tax could help prevent the type of “race to the bottom” that has been underway, Ms. Yellen said, referring to countries trying to outdo one another by lowering tax rates in order to attract business.
Her remarks came as the White House and Democrats in Congress begin looking for ways to pay for President Biden’s sweeping infrastructure plan to rebuild America’s roads, bridges, water systems and electric grid.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Ms. Yellen said. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
The speech represented Ms. Yellen’s most extensive comments since taking over as Treasury secretary, and she underscored the scope of the challenge ahead.
“Over the last four years, we have seen firsthand what happens when America steps back from the global stage,” Ms. Yellen said. “America first must never mean America alone.”
Ms. Yellen also highlighted her priorities of combating climate change and reducing global poverty and underscored the importance of the United States helping to lead the world out of the crisis caused by the pandemic. Ms. Yellen called on countries not to pull back on fiscal support too soon and warned of growing global imbalances if some countries do withdraw before the crisis is over.
In a sharp break with the administration of former President Donald J. Trump, Ms. Yellen emphasized the importance of the United States working closely with its allies, noting that the fortunes of countries around the world are intertwined.
Overhauling the international tax system is a big part of that. Corporate tax rates have been falling around the world in recent years. Under the Trump administration, the rate in the United States was cut from 35 percent to 21 percent. Mr. Biden wants to raise that rate to 28 percent and increase the international minimum tax rate that American companies pay on their foreign profits to 21 percent.
The Organization for Economic Cooperation and Development, in coordination with the United States, has been working to develop a new international tax architecture that would include a global minimum tax rate for multinational corporations as part of its effort to curtail profit shifting and tax base erosion.
Ms. Yellen said she is working with her counterparts in the Group of 20 advanced nations on changes to the global tax system that will help prevent businesses from shifting profits to low-tax jurisdictions.
“President Biden’s proposals announced last week call for bold domestic action, including to raise the U.S. minimum tax rate, and renewed international engagement, recognizing that it is important to work with other countries to end the pressures of tax competition and corporate tax base erosion,” Ms. Yellen said. “We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom.”
The Centers for Disease Control and Prevention issued long-awaited technical guidance for cruise lines on Friday, bringing them one step closer to sailing again in United States waters.
While some cruise lines operating in Europe have been requiring all passengers to be vaccinated, the C.D.C. did not go that far. Vaccination will be critical in the safe resumption of cruising, the agency said, and it recommended that all eligible port personnel, crew and passengers get a Covid-19 vaccine as soon as one becomes available to them.
By making vaccinations a recommendation instead of a requirement, the C.D.C. has avoided conflict with Florida, one of the cruise industry’s biggest bases of operations, which has banned businesses from requiring customers to show proof of vaccinations.
Cruise ships in the U.S. have been docked for over a year because of the pandemic and can only restart operations by following the C.D.C.’s Framework for Conditional Sailing Order, issued in October to ensure that cruise ships build the onboard infrastructure needed to mitigate the risks of the coronavirus.
The technical instructions will allow cruise lines to prepare their ships for simulation voyages, designed to test health and safety protocols and operational procedures with volunteers before sailing with paying passengers.
The new recommendations include increasing from weekly to daily the reporting of Covid-19 cases, implementing routine testing of all crew based on a ship’s Covid-19 status and making contractual arrangements with medical facilities on shore for passengers who may fall ill during a voyage.
Once cruise lines have prepared their ships, they must give 30 days notice to the C.D.C. before starting test cruises and will have to apply for a conditional sailing certificate 60 days before a planned regular voyage.
Norwegian Cruise Line, one of the industry’s biggest operators, submitted a letter to the C.D.C. on Monday outlining its plan to resume cruises from U.S. ports in July, which included mandatory vaccination of all guests and crew. The company said that its vaccination requirement and multilayered health and safety protocols exceeded the agency’s Conditional Sailing Order requirements.
At one point the target was the start of 2021. Then it was bumped to July. Now September is the new goal that many companies have marked on the calendar for bringing back office workers who have been working remotely for the past year.
Maybe. Companies are wary of setting hard deadlines, recent reporting by The New York Times found. Some corporations are reopening offices in the spring, and many are saying they will remain flexible, staging returns over several months and planning to allow some workers to continue to work from home for a few days a week or longer. As nerve-racking as it was last year to be abruptly torn from their desks, many people find the prospect of returning distressing.
Here is what some of the country’s biggest companies are telling workers.
Ford, which has more than 30,000 employees in the United States working remotely because of the pandemic, said in March that it would transition to a “flexible hybrid work model.” The company plans to let people stay home for focused work and come into the office for activities that require teamwork. The new protocol will start in July, when the company, which has its main campus in Dearborn, Mich., expects to gradually start bringing more employees back.
IBM, which employs about 346,000 people, hasn’t set a strict timeline for when its U.S. workers will return to the office. It expects about 80 percent of its employees to work with some combination of remote and office schedules, depending largely on role.
The bank, which has more than 20,000 office employees in New York City, has told employees that the five-day office workweek is a relic. The bank is considering a rotational work model, meaning employees would switch between working remotely and in the office.
The consulting firm, which has about 284,000 employees, is set to open one office in each of its major cities in May, and all of its offices in September. Even when the offices are formally reopened, PwC will allow some workers, depending on their job, to work remotely at least part time.
Most of Walmart’s 1.5 million employees work at the retail giant’s stores, and a vast number have continued to go in throughout the pandemic. It said on March 12 that it would start bringing workers back at its Bentonville, Ark., office campus no earlier than July. Its global technology employees will continue to work virtually “for the long term.”
At Wells Fargo, 60,000 employees worked at bank branches and other facilities during the pandemic, but 200,000 more worked remotely. The company told its staff in a memo last month that it had set a Sept. 6 return-to-office target and was “optimistic” that conditions surrounding Covid-19 vaccinations and case levels would allow it to keep it.
Corporations have increasingly taken social and political stands, often spurred by the policies of former President Donald J. Trump. But the fight over voting laws, like the one recently passed in Georgia that restricts ballot access in several ways, has again thrust big businesses into partisan politics, pulled by Democrats focused on social justice and Republicans who have proven willing to punish those that cross them.
It presents a “head-spinning new landscape for big companies,” The New York Times’s David Gelles writes.
In Georgia, Delta tried to stay out of the fight at first. The airline is the state’s largest employer, and civil rights activists reached out to the company in February, flagging what they saw as problematic provisions in the Georgia voting law. The next month, Delta’s lobbyists pushed state lawmakers to remove some of the provisions, although Ed Bastian, the carrier’s chief executive, spoke out only in general terms until the bill was passed.
Then a group of more than 70 Black executives published a letter decrying the law and others like it in the works. The former American Express chief executive Kenneth Chenault, who is Black, spoke at length with Mr. Bastian. Mr. Bastian wrote a strongly worded memo that was sent to staff members the next morning, expressing “crystal clear” opposition to the law, which he said was “based on a lie.” Coca-Cola’s James Quincey quickly followed. The companies subsequently faced more criticism from Republican leaders than did other big Atlanta employers, like Home Depot and UPS, that stuck to less-specific statements about voting rights.
More fallout from the Georgia law:
Major League Baseball cited its opposition to “restrictions to the ballot box” as the reason for moving its All-Star Game out of Atlanta. Moving the game could cost Georgia over $100 million in tourism revenue, prompting the state’s Republican governor, Brian Kemp, to decry the move as a surrender to liberal activists.
Stacey Abrams, the prominent Georgia Democrat and voting rights activist, said she was “disappointed” by M.L.B.’s move and worried about the economic hit, but supported the league’s overall stance. The producer and actor Tyler Perry also fretted about collateral damage from boycotts even as he protested the law.
Trying to avoid a repeat in Texas, American Airlines and Dell have objected to a proposal that would restrict measures designed to make voting easier in the state. The statements were more forceful than Coke and Delta had initially been in Georgia. “To make American’s stance clear: We are strongly opposed to this bill and others like it,” the airline said.
Wall Street began the week on an upswing, with the S&P 500 rising 0.8 percent. Asian markets also gained in the wake of Friday’s U.S. jobs report, which marked a bigger-than-expected surge in hiring last month.
The Nikkei index in Japan rose 0.8 percent, to its highest level since mid March, and the Kospi index in South Korea gained 0.3 percent.
Stock markets were closed for holidays in China, Hong Kong and much of Europe.
Digesting the jobs report
The Labor Department on Friday reported U.S. employers added 916,000 jobs in March, the biggest jump since August, and the unemployment rate fell to 6 percent. The news exceeded expectations, and the gains were broad based, with hiring in the hospitality, retailing and transportation sectors all rising.
Adding some uncertainty to the bullish numbers is a rise in coronavirus cases in the United States after weeks of decline. But as Ben Casselman reported in The New York Times: “Few economists expect a repeat of the winter, when a spike in Covid-19 cases pushed the recovery into reverse. More than a quarter of U.S. adults have received at least one dose of a coronavirus vaccine, and more than two million people a day are being inoculated.”
Bonds and oil
Yields on 10-year Treasury notes, which have been on an upward trajectory since October, have stabilized over the last few days. On Monday the yield was down slightly to 1.72 percent.
Oil prices fell. Brent crude, the international benchmark, fell about 2 percent to $63.50 a barrel, and West Texas Intermediate fell to just above $60 a barrel. Traders have been adjusting their positions since last Thursday’s decision by OPEC and its allies to slowly relax curbs on output. Those controls were put in place in response to the sharp decline in oil demand during the pandemic.
Tesla jumped more than 6 percent on Monday. The company said on Friday that it more than doubled the number of cars it delivered in the first quarter. The electric carmaker sold 184,8000 vehicles in the first three months of the year, up from 88,500 a year ago. It produced 180,338 vehicles, compared with 102,672 in the first quarter of 2020.
GameStop said Monday that it would sell up to 3.5 million additional shares to “further accelerate its transformation” and to strengthen its balance sheet. The struggling bricks-and-mortar retailer, which found itself at the center of a trading frenzy in January, is aiming to become more of an online operation. Additional shares would dilute the ownership of its existing investors — and GameStop’s shares fell more than 10 percent in early trading.
The government’s central small business relief effort, the Paycheck Protection Program, has made $734 billion in forgivable loans to nearly seven million businesses. But minority-owned businesses were disproportionately underserved by the program, a New York Times analysis found.
“The focus at the outset was on speed, and it came at the expense of equity,” said Ashley Harrington, the federal advocacy director at the Center for Responsible Lending.
The aid program’s rules were mostly written on the fly, and reaching harder-to-serve businesses was an afterthought. Structural barriers and complicated, shifting requirements contributed to a skewed outcome, The New York Times’s Stacy Cowley reports.
In the program’s final weeks — it is scheduled to stop taking applications on May 31 — President Biden’s administration has tried to alter its trajectory with rule changes intended to funnel more money toward businesses led by women and minorities. But those revisions have run into their own obstacles, including the speed with which they were rushed through. Lenders, caught off guard, have struggled to carry them out.
“Historically, access to capital has been the leading concern of women- and minority-owned businesses to survive, and during this pandemic it has been no different,” Jenell Ross, who owns an auto dealership, told a House committee.
The United States and its record-setting stimulus spending could help haul a weakened Europe and struggling developing countries out of their own economic morass.
American buyers are spurring demand for German cars, Australian wine, Mexican auto parts and French fashions. And many Americans have spent their stimulus checks on video game consoles, exercise bicycles or other products made in China.
The United States’ comparatively fast recovery involved a little bit of luck — new variants of the virus have just begun to push domestic infections higher — and a large policy response, including more than $5 trillion in debt-fueled pandemic relief, The New York Times’s Jeanna Smialek and Jack Ewing report.
“When the U.S. economy is strong, that strength tends to support global activity as well,” said Jerome H. Powell, the chair of the Federal Reserve.
But some hazards lurk. The slow pace of the European Union’s vaccination campaign will probably hurt its economy. Poorer and smaller countries, facing severely limited vaccine supplies and fewer resources to support government spending, are likely to struggle to stage an economic turnaround even if the U.S. recovery increases demand for their exports.
Small British chocolate makers emphasizing ethically sourced ingredients and bespoke batches became big sellers in Europe in recent years but have been nearly impossible to find there since January, David Segal reports for The New York Times.
“We have customers complain to us all the time, ‘Why can’t I buy my favorite British chocolate?'” said Hishem Ferjani, the founder of Choco Dealer in Bonn, Germany, which supplies grocery stores and sells through its own website. “We have store owners with empty shelves.”
“We have to explain, it’s not our fault, it’s not the fault of the producer. It’s Brexit,” he said.
Chocolate is Britain’s No. 2 food and drink export, after whiskey, according to the Food and Drink Federation. Chocolate exports to all countries hit $1.1 billion last year, and Europe accounts for about 70 percent of those sales. In January, exports of British chocolate to Europe fell 68 percent compared with the same period the year before.
The trade deal struck late last year with the European Union has not saved British companies from a maddening, unpredictable array of time-consuming, morale-sapping procedures and from stacks of paperwork that have turned exporting to the E.U. into a sort of black-box mystery. Goods go in and there is no telling when they will come out.
Around 50 groups have filed amicus briefs in a coming Supreme Court case pitting charities against the state of California in a fight over donation disclosures. A new brief from 15 Democratic senators explained how untraceable donations, or “dark money,” make their way into politics through social welfare charities. The senators warned that siding with the charities will increase the political influence of wealthy individuals and corporations, the DealBook newsletter reports.
The case was brought by the Americans for Prosperity Foundation, a “social welfare” nonprofit affiliated with the Koch network, against the state, which requires charities to privately disclose major donors in tax documents. The foundation says that anonymity is protected by the First Amendment and that disclosure could expose donors to threats. An appeals court sided with California, however, and the foundation wants the justices to reverse the ruling.
The Capitol riot on Jan. 6 put a spotlight on corporations’ direct and indirect political donations; justices agreed on Jan. 8 to hear the case and arguments will take place later this month.
Business interests want to create a “broad expansion of dark money rights,” the senators’ brief stated, referring to untraceable donations that are often routed via nonprofit groups. The court case is an influence campaign disguised as a technical legal fight, the senators said. The Chamber of Commerce and National Association of Manufacturers are among the trade groups supporting the foundation’s demand for anonymity.
Anonymous donors work like covert intelligence operations, the senators wrote. The donors give millions annually to charities that spend it in an effort to influence politics and policy. The senators pointed to congressional appropriations rules blocking disclosure efforts by the I.R.S. and S.E.C. over the past decade as evidence that the groups have swayed lawmakers behind the scenes. They also cite the number of amicus briefs filed as evidence of this issue’s significance, noting that briefs are an element of the business lobby’s influence campaigns.
The federal government is siding with California, more or less, telling the justices in a brief that the charities’ constitutional claim is wrong but that the case should be sent back to the lower courts for more analysis.