Yellen urges EU to back global tax deal, consider more fiscal support

U.S. Treasury Secretary Janet Yellen urged European Union countries on Monday to sign on to a global deal to revamp corporate taxation, keep fiscal support through 2022 and consider more spending in the face of COVID-19 uncertainty.

"We need sustainable sources of revenue that do not rely on further taxing workers' wages and exacerbating the economic disparities that we are all committed to reducing," Yellen said in remarks prepared for delivery to Eurogroup finance ministers.

"We need to put an end to corporations shifting capital income to low tax jurisdictions, and to accounting gimmicks that allow them to avoid paying their fair share."

A tax-cut race to the bottom must end, she said.

Irish finance minister Paschal Donohoe, who chairs the Eurogroup of euro zone finance ministers, maintained his reservation about a global minimum corporate tax rate in a meeting with Yellen, his spokesperson said.

Donohoe told reporters that he "affirmed to Secretary Yellen that Ireland remains very committed to the process, constructively engaging with the OECD" on taxes.

The European Commission said on Monday that it will delay its own planned levy on digital services to focus on the global tax deal, final details of which have to be agreed in October.

The EU has been under pressure from the U.S. administration, which wants existing national digital service taxes to be repealed as part of the global overhaul of cross-border corporate taxation.

Yellen declined to comment when asked to react to the commission's delay.

CONSIDER MORE SPENDING

Yellen said that the fiscal response of the EU and its members to the COVID-19 pandemic had been "decisive and unprecedented", with a rapid response also from the European Central Bank. But G20 finance ministers over the weekend warned that the rapid spread of COVID-19 variants was threatening a strong global recovery.

"I think we all agree that uncertainty remains high. In this context, it is important that the fiscal stance remain supportive through 2022," Yellen said.

She added that EU member states should also "seriously consider" additional fiscal measures to ensure a robust domestic and global recovery.

Yellen also called on European governments to join Washington in pushing back against "malign behavior" from China and Russia and abuses in Belarus.

"Together, we need to counter threats to the principles of openness, fair competition, transparency, and accountability," Yellen said.

"These challenges include China's unfair economic practices, malign behavior, and human rights abuses, the Lukashenko regime's ongoing abuses in Belarus, and Russia's continued and growing malign behavior.