JPMorgan Chase Chairman and CEO Jamie Dimon testifies about JPMorgan Chase’s trading loss on June 19, 2012 during a House Financial Services Committee hearing on Capitol Hill in Washington, DC.
Saul Loeb | AFP | Getty Images
JPMorgan Chase CEO Jamie Dimon and Citigroup chief executive Jane Fraser expressed concern Thursday about President Joe Biden’s efforts to increase the amount of taxes companies pay on foreign profits while aiming for a global minimum tax rate on Establish company.
When testifying before the House of Representatives Financial Services Committee, Dimon argued that a plan to increase the US tax rate on foreign profits to 21% could cause companies to move business overseas over time. Dimon believes change could accelerate if the allies fail to deliver on their promise to introduce a similar global minimum tax rate.
“America, I believe, would be the only country in the world that would have what is known as a global tax rate,” he said, referring to the proposed rate of 21% on US corporate foreign income.
“There is no question to me that that on the fringes … will drive capital and ultimately the mind, research and development and investment abroad,” he said. “And that would be a mistake for America.”
Fraser, Citigroup’s new CEO, agreed, adding that “despite some optimism, it is very difficult to get other countries to join an equivalent program.”
“I think this will be extremely difficult,” she continued. “And so it could put the US in a position to be less competitive globally.”
The comment from two of the country’s top bankers came as the Biden government continued to seek international support for a minimum global corporate tax rate of 15%.
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The Treasury Department, which has taken the lead in trying to convince Germany, France and others to support the plan, claims that a universal floor on corporate tax rates would allow governments to generate tax revenues more effectively.
Neither the White House nor the Treasury Department wanted to comment.
According to Treasury Secretary Janet Yellen, the current system provides an incentive for countries to offer lower effective corporate rates over time to attract businesses in all regions.
However, Dimon and others have expressed doubts about the prospect of long-term success in convincing US peers to meet a global minimum of 15% or some other level, especially when it might be more lucrative for governments to scam the system through backdoor incentives or to disregard the agreement altogether.
A JPMorgan spokesman said the concern was that the US would introduce a relatively high tax on foreign income at 21% just to have foreign partners evade their own tax pledges. This scenario could put the US at a competitive disadvantage and encourage the offshoring of factories, profits and workers.
The Treasury Department has reiterated that the 15% proposal should be seen as some sort of lower limit and that later discussions could eventually increase it. In theory, this could reduce a tax disadvantage.
That the White House is interested in persuading others to implement a global minimum tax is not necessarily a surprise, given the amount of spending it wants to see to meet its agenda priorities.
His American job plan, an infrastructure-oriented proposal, would pour $ 2.3 trillion over a decade into traditional infrastructure, as well as scientific innovations, the payment of household help, and the construction of 500,000 electric vehicle charging points.
The GOP countered Thursday with its own version, a more modest $ 928 billion proposal with a stronger focus on “hard” infrastructure like roads, bridges and public transportation.
The White House also hopes to pass the American Families Plan, a $ 1.8 trillion bill that aims to fund social programs like paid family vacations, free early childhood education, and free community college.
The Biden economics team says its Made In America tax plan would help cover the cost of both bills. By and large, this tax plan aims to empower the IRS and tackle tax evasion, increasing the amount the wealthiest households pay for capital gains, and increasing the rate US corporations pay for domestic profits to 28% .
President Donald Trump’s tax cuts in 2017 lowered the U.S. corporate tax rate from 35% to 21%.
The bank CEOs appeared before the U.S. Senate Committee on Banking, Housing and Urban Development Wednesday.
An irritable exchange from that hearing came between Sen. Elizabeth Warren, D-Mass., And Dimon. Warren accused JPMorgan Chase and the other consumer banks for not doing enough to inform their customers of the easing of certain overdraft fee rules during the coronavirus outbreak.
Dimon countered that the bank had been accommodating customers who had validated requests for exemption from overdraft fees and that the bank would not refund billions in 2020 that it had earned in such fees.