FILE PHOTO: Gita Gopinath, economic advisor and director of the research division of the International Monetary Fund (IMF), speaks during a press conference on July 23, 2019 in Santiago, Chile. REUTERS / Rodrigo Garrido / File Photo
WASHINGTON (Reuters) – The International Monetary Fund has long been in favor of introducing a global minimum tax on corporate profits, the fund’s chief economist Gita Gopinath told reporters Tuesday, calling tax avoidance a problematic issue for the global economy.
Gopinath said the current differences in national corporate tax rates have sparked “a great deal” of tax shifts and avoidance, and reduced the tax base on which governments could generate revenue to fund necessary economic and social expenditures.
“It’s a big problem,” Gopinath told reporters during an online briefing. “We are very much in favor of a global minimum corporate tax.”
French Treasury Secretary Bruno Le Maire said Tuesday a global deal on cross-border taxes was at hand as he welcomed US Treasury Secretary Janet Yellen’s pledge to work on a global business floor.
Gopinath said the IMF was not in a position at the ideal level for such a tax rate, adding that governments would need to replenish their coffers after massive spending in order to contain the COVID-19 pandemic and mitigate its economic impact.
“The hope is that they will move forward better to have more inclusive, sustainable and environmentally friendly economies and that would require action on both the revenue and expenditure side,” she said, adding that each country is carefully adjusting its economy would have to take its own actions on the tax front.
Gopinath said the IMF is still considering the Biden administration’s proposal to raise the corporate tax rate to 28%, but noted that the former Trump administration’s decision to cut that tax rate from 35% to 21% in 2017 had less of an impact the investment had been as originally expected.
US President Joe Biden said Monday there was “no evidence” that a seven percentage point increase in the corporate tax rate would boost overseas business.
White House press secretary Jen Psaki noted that the 28% rate would be lower than it has ever been since World War II.
Reporting by Andrea Shalal and David Lawder; Adaptation by Chizu Nomiyama