US Treasury Secretary Janet Yellen pushes countries to 'give up the game' on corporate taxes

Raising US corporate taxes could spur similar moves by other countries and hasten the establishment of a global minimum corporate tax, US Treasury Secretary Janet Yellen said on Wednesday.

US President Joe Biden last week unveiled a $2 trillion jobs and infrastructure plan paid for in part by an increase in the domestic corporate tax rate, and by sweeping up corporate profits stashed overseas.

A unilateral tax hike could put the United States at a disadvantage with other nations with lower rates, but Yellen predicted the proposed increase would encourage other countries to end the competition over providing corporations the most favorable tax climate.

"We're not only ending America's participation in the race to the bottom. The tax plan incentivizes the whole world to give up the game," Yellen told reporters.

"Destructive tax competition will only end when enough major economies stop undercutting one another and agree to a global minimum tax, and this proposal includes some powerful incentives for nations to do that."

Read: Global minimum tax for corporations inches towards reality

Yellen earlier this week announced that Washington would push the G20 for an agreement on a global minimum corporate tax to stem the erosion of government revenues, and the bloc is expected to unveil a proposal by July.

G20 finance ministers met Wednesday and agreed to continue work on a "globally fair, sustainable and modern international tax system."

Biden's plan partially reverses former President Donald Trump's 2017 corporate tax cut, a reform Yellen said cost the United States jobs and tax revenue.

"The law actually incentivizes American companies to offshore their workers and investments and to shift their profits to tax havens," she said.

The reform drove corporate tax collections to their lowest level since World War II, she said.

Under current law, the US would lose roughly $2 trillion of corporate tax base over the coming decade "because of this broken system."

"Simply put, by choosing to compete on taxes, we've neglected to compete on the skill of our workers and the strength of our infrastructure," Yellen said.

Companies currently pay an effective tax rate of just under eight percent, according to details of the plan released by the Treasury.

Read: US Treasury Secretary Janet Yellen calls for minimum global corporate income tax

The proposal raises the official rate to 28 percent from 21 percent, and increases the minimum tax on businesses to 21 percent, "ending the ability of multinationals to shield income in tax havens from US taxes," Treasury said.

However, the US tax rate would remain about seven percentage points below its level prior to the 2017 overhaul.

Another provision is targeted at companies that report massive incomes but pay no taxes at all, a practice Biden has vowed to end.

Under the plan, corporations that report "sky-high profits" to shareholders -- known as their "book income" -- but report no taxable income, would pay a minimum tax of 15 percent on those profits.

"In a typical year, around 200 companies report net income of $2 billion or more," Treasury said.

But due to loopholes in tax law, "a significant share pay zero or negative federal income taxes, despite reporting hundreds of billions of dollars in profits to shareholders," according to the report.