Jamie Dimon, CEO of JPMorgan Chase, testifies during a U.S. House Financial Services Committee hearing on Capitol Hill in Washington, DC on June 19, 2012, about the trading loss of JPMorgan Chase.
Saul Loeb | AFP | Getty Images
JPMorgan Chase CEO Jamie Dimon and Citigroup Chief Jane Fraser expressed concerns on Thursday over President Joe Biden’s efforts to increase the amount of taxes companies pay on foreign profits and a concomitant target to set a minimum worldwide corporate tax rate.
Testifying before the House Financial Services Committee, Dimon argued that a plan to increase the U.S. tax rate on foreign profits to 21% could, over time, cause companies to move their operations to abroad. Dimon believes that change could accelerate if the allies renege on their promises to impose a similar overall minimum tax rate.
“America would be the only country, I think, in the world that would have what we call a global tax rate,” he said, referring to the proposed rate of 21% on the foreign income of American companies. .
“There is no doubt in my mind that at the margin … it will boost capital and eventually brains, R&D and overseas investment,” he said. “And that would be a mistake for America.”
Fraser, the new CEO of Citigroup, confirmed, adding that “it is very difficult to get other countries to sign an equivalent program despite some optimism.”
“I think it will be extremely difficult,” she continued. “And, therefore, it could put the United States in a less competitive position in the world.”
The comments from two of the nation’s largest bankers came as the Biden administration continued to seek international support for a minimum global corporate tax rate of 15%.
The Treasury Department, which has taken the lead in trying to persuade Germany, France and others to support the plan, argues that a universal floor on corporate tax rates would allow governments to generate more efficiently tax revenue.
Neither the White House nor the Treasury Department wanted to comment on the matter.
The current system, according to Treasury Secretary Janet Yellen, prompts countries to offer lower effective rates for businesses over time in a “race to the bottom” to attract businesses across geographies.
But Dimon and others have expressed doubts about any chance of long-term success in persuading American peers to adhere to a global minimum of 15% or any other level, especially when it may be more lucrative for them. governments trick the system into offering back door incentives. or violate the agreement entirely.
A spokesperson for JPMorgan explained that the concern is that the United States would adopt a relatively high foreign income tax, at 21%, only to have foreign partners shirk their own tax promises. This scenario could put the United States at a competitive disadvantage and encourage the offshoring of factories, profits, and workers.
The Treasury Department reiterated that the 15% proposal, below what some had predicted, should be seen as a kind of floor and that subsequent discussions could possibly push it higher. This, in theory, could help reduce a tax disadvantage.
That the White House wants to convince others to adopt a global minimum tax is not necessarily a surprise given how much spending it wants to see to meet its agenda priorities.
Its U.S. Jobs Plan, an infrastructure-focused proposal, would spend $ 2.3 trillion over a decade on traditional infrastructure as well as scientific innovation, paying for home health aids, and the construction of 500,000 charging stations for electric vehicles.
The GOP countered with their own version Thursday, a more modest $ 928 billion proposal with a greater focus on “hard” infrastructure like roads, bridges and public transportation.
The White House also hopes to enact the American Families Plan, a $ 1.8 trillion law to fund social programs such as paid family leave, free early childhood education, and free community colleges.
Biden’s economics team said their Made In America tax plan would help cover the costs of both bills. Taken together, this tax plan aims to fortify the IRS and crack down on tax evasion, increase the amount wealthier households pay on capital gains, and raise the rate that U.S. businesses pay on capital gains to 28%. national profits.
President Donald Trump’s tax cuts in 2017 cut the corporate tax rate in the United States to 21% from 35%.
The bank’s CEOs appeared before the US Senate Committee on Banking, Housing and Urban Affairs on Wednesday.
An irritable exchange of that hearing took place between Senator Elizabeth Warren, D-Mass., And Dimon. Warren has accused JPMorgan Chase and other consumer banks of not doing enough to let customers know about the relaxation of some overdraft fee rules during the coronavirus outbreak.
Dimon countered that the bank had taken in customers who had applied for waivers of qualifying overdraft fees and that the bank would not reimburse the billions it had collected from those fees in 2020.