The International Monetary Fund (IMF) warned Tuesday that a global tax deal is “urgently needed” in order to avoid a potential trade war.
“We are particularly optimistic for a global agreement on corporate income taxation in 2021,” IMF Managing Director Kristalina Georgieva said on Tuesday, Bloomberg reported.
“And it is urgently needed to avoid, down the road, the risk of spiraling into a chaotic tax or trade war where everyone loses,” Georgieva added.
The IMF threw its support behind a proposal by President Biden in April to implement a minimum corporate global tax rate.
“The IMF has been calling for a minimum global corporate income tax rate as a way to interrupt the race to the bottom in corporate income taxation,” IMF Fiscal Affairs Director Vitor Gaspar said in April.
Speaking to the Wall Street Journal on Tuesday, Treasury Secretary Janet Yellen reiterated that she was working with other countries to end a “global corporate tax race to the bottom.”
“I fear that this race to the bottom globally with respect to corporate taxes is depriving countries of the revenue that they really need to invest in infrastructure, education, R&D, and other things that spur growth and also impact corporate competitiveness,” she said.
Republicans have criticized Biden’s plan to raise corporate taxes to pay for his infrastructure plan, arguing it would make the U.S. less competitive and drive companies overseas.
Georgieva said Tuesday that the coronavirus and climate change could be an opportunity for the international community to come together and work on the international tax system.
The IMF said in April that 2021 was on pace for record global economic growth after last year’s hit from the coronavirus.