Mr. Malpass has ingratiated himself with World Bank staff with his steady, low-key approach and congenial manner. He has also benefited from low expectations. But with three years left to go in his term, some development experts want to see more.
Scott Morris, a senior fellow at the Center for Global Development, a Washington think tank, said it was unfortunate that the World Bank appeared to be leaving the door open for funding fossil fuel projects. He suggested that Mr. Malpass still had yet to lay out a clear strategic vision for the bank, but credited him for embracing climate change.
“It is remarkable to compare his statements today with his positions as a Treasury official in the Trump administration two years ago, when the official position was to strike the word ‘climate’ from any multilateral institution’s documents,” Mr. Morris said. “By that standard, he’s made a remarkable evolution toward being a climate leader.”
He added: “But it is a question of compared to what, and is he up to the task of being the leader of this critical institution for climate finance?”
The bank will accelerate its efforts in the coming months. Mr. Malpass, in a speech last month about “building a green, resilient and inclusive recovery,”saidhis team was integrating climate into all of the bank’s country strategies and would complete climate and development reports for 25 countries this year.
Mr. Malpass has more recently been working to curry favor with the Biden administration. He speaks regularly to Ms. Yellen and personally invited her to participate in the climate discussion this past week.
Asked what the transition from the Trump administration to the Biden administration had meant for the bank, Mr. Malpass answered carefully. He noted that under Mr. Trump, the United States had approved a capital increase for the bank. He said the new White House team was highly committed to the bank’s goals of reducing poverty, making food accessible and preparing countries for a changing climate.
“The Biden administration policies have been very supportive of that mission,” Mr. Malpass said.
WASHINGTON — The Biden administration unveiled a tax plan on Wednesdaythat would increase the corporate tax rate in the U.S. and limit the ability of American firms to avoid taxes by shifting profits overseas.
Much of the plan is aimed at reversing a deep reduction in corporate taxes under President Donald J. Trump. A 2017 tax bill slashed the corporate rate to 21 percent from 35 percent and enacted a series of other provisions that the Biden administration says have encouraged firms to shift profits to lower-tax jurisdictions, like Ireland.
Some of the provisions in President Biden’s plan can be enacted by the Treasury Department, but many will require the approval of Congress. Already, Republicans have panned the proposals as putting the U.S. at a disadvantage, while some moderate Democrats have indicated they may also want to see some adjustments, particularly to the proposed 28 percent corporate tax rate.
Administration officials estimate the proposals will raise a total of $2.5 trillion in new tax revenue over a 15 year span. Analysts at the University of Pennsylvania’s Penn Wharton Budget Model put the estimate even higher, estimating a 10-year increase of $2.1 trillion, with about half the money coming from the plan’s various changes to the taxation of multinational corporations.
Organization for Economic Cooperation and Development.
The administration sees raising the rate as a way to increase corporate tax receipts, which have plunged to match their lowest levels as a share of the economy since World War II.
Ensure big firms pay at least 15 percent in taxes
Many large companies pay far less than the current tax rate of 21 percent — and sometimes nothing. Tax code provisions allow firms to reduce their liability through deductions, exemptions, offshoring and other mechanisms.
The Biden plan seeks to put an end to big companies incurring zero federal tax liability and paying no or negative taxes to the U.S. government.
the so-called global intangible low-taxed income (or GILTI) tax to 21 percent, which would narrow the gap between what companies pay on overseas profits and what they pay on earned income in the U.S.
And it would calculate the GILTI tax on a per-country basis, which would have the effect of subjecting more income earned overseas to the tax than under the current system.
Punish U.S. companies that headquarter in low-tax countries
A provision in the plan known as SHIELD (Stopping Harmful Inversions and Ending Low-tax Developments) is an attempt to discourage American companies from moving their headquarters abroad for tax purposes, particularly through the practice known as “inversions,” where companies from different countries merge, creating a new foreign firm.
Under current law, companies with headquarters in Ireland can “strip” some of the profits earned by subsidiaries in the United States and send them back to the Ireland company as payment for things like the use of intellectual property, then deduct those payments from their American income taxes. The SHIELD plan would disallow those deductions for companies based in low-tax countries.
Push for a global agreement to end profit shifting
The Biden administration wants other countries to raise their corporate tax rates, too.
The tax plan emphasizes that the Treasury Department will continue to push for global coordination on an international tax rate that would apply to multinational corporations regardless of where they locate their headquarters. Such a global tax could help prevent the type of “race to the bottom” that has been underway, Treasury Secretary Janet Yellen has said, referring to countries trying to outdo one another by lowering tax rates in order to attract business.
Republican critics of the Biden tax plan have argued that the administration’s focus on a global minimum tax is evidence that it realizes that raising the U.S. corporate tax rate unilaterally would make American businesses less competitive around the world.
Replace fossil fuel tax subsidies with clean-energy incentives
The president’s plan would strip away longstanding subsidies for oil, gas and other fossil fuels and replace them with incentives for clean energy. The provisions are part of Mr. Biden’s efforts to transition the U.S. to “100 percent carbon pollution-free electricity” by 2035.
The plan includes a tax incentive for long-distance transmission lines, would expand incentives for electricity storage projects and would extend other existing clean-energy tax credits.
A Treasury Department report estimated that eliminating subsidies for fossil fuel companies would increase government tax receipts by over $35 billion in the coming decade.
“The main impact would be on oil and gas company profits,” the report said. “Research suggests little impact on gasoline or energy prices for U.S. consumers and little impact on our energy security.”
Doing away with fossil fuel subsidies has been tried before, with little success given both industry and congressional opposition.
Beef up the Internal Revenue Service
The Internal Revenue Service has struggled with budget cuts and slim resources for years. The Biden administration believes better funding for the tax collection agency is an investment that will more than pay for itself. The plan released on Wednesday includes proposals to bolster the I.R.S. budget so it can hire experts to pursue large corporations and ensure they are paying what they owe.
The Treasury Department, which oversees the I.R.S., noted in its report that the agency’s enforcement budget has fallen by 25 percent over the last decade and that it is poorly equipped to audit complex corporate filings. The agency is also unable to afford engaging in or sustaining multiyear litigation over complex tax disputes, Treasury said.
As a result of those constraints, the I.R.S. tends to focus on smaller targets while big companies and the wealthiest taxpayers are able to find ways to reduce their tax bills.
WASHINGTON — Large companies like Apple and Bristol Myers Squibb have long employed complicated maneuvers to reduce or eliminate their tax bills by shifting income on paper between countries. The strategy has enriched accountants and shareholders, while driving down corporate tax receipts for the federal government.
President Biden sees ending that practice as central to his $2 trillion infrastructure package, pushing changes to the tax code that his administration says will ensure American companies are contributing tax dollars to help invest in the country’s roads, bridges, water pipes and other parts of his economic agenda.
On Wednesday, the Treasury Department released the details of Mr. Biden’s tax plan, which aims to raise as much as $2.5 trillion over 15 years to help finance the infrastructure proposal. That includes bumping the corporate tax rate to 28 percent from 21 percent, imposing a strict new minimum tax on global profits and levying harsh penalties on companies that try to move profits offshore.
The plan also aims to stop big companies that are profitable but have no federal income tax liability from paying no taxes to the Treasury Department by imposing a 15 percent tax on the profits they report to investors. Such a change would affect about 45 corporations, according to the Biden administration’s estimates, because it would be limited to companies earning $2 billion or more per year.
President Donald J. Trump’s 2017 tax cuts. Biden administration officials say that law increased the incentives for companies to shift profits to lower-tax countries, while reducing corporate tax receipts in the United States to match their lowest levels as a share of the economy since World War II.
Treasury Secretary Janet L. Yellen, in rolling out the plan, said it would end a global “race to the bottom” of corporate taxation that has been destructive for the American economy and its workers.
“Our tax revenues are already at their lowest level in generations,” Ms. Yellen said. “If they continue to drop lower, we will have less money to invest in roads, bridges, broadband and R&D.”
The plan, while ambitious, will not be easy to enact.
Some of the proposals, like certain changes to how a global minimum tax is applied to corporate income, could possibly be put in place by the Treasury Department via regulation. But most will need the approval of Congress, including increasing the corporate tax rate. Given Democrats’ narrow majority in both the Senate and the House, that proposed rate could drop. Already, Senator Joe Manchin III of West Virginia, a crucial swing vote, has said he would prefer a 25 percent corporate rate.
search of the lowest possible tax bill.
Companies also shift jobs and investments between countries, but often for different reasons. In many cases, they are following lower labor costs or seeking customers in new markets to expand their businesses. The Biden plan would create new tax incentives for companies to invest in production and research in the United States.
weakened by subsequent regulations issued by Mr. Trump’s Treasury Department.
Conservative tax experts, including several involved in writing the 2017 law, say they have seen no evidence of the law enticing companies to move jobs overseas. Mr. Biden has assembled a team of tax officials who contend the provisions have given companies new incentives to move investment and profits offshore.
Mr. Biden’s plan would raise the rate of Mr. Trump’s minimum tax and apply it more broadly to income that American companies earn overseas. Those efforts would try to make it less appealing for companies to book profits in lower-tax companies.
The S.H.I.E.L.D. proposal is an attempt to discourage American companies from moving their headquarters abroad for tax purposes, particularly through the practice known as “inversions,” where companies from different countries merge, creating a new foreign-located firm.
Under current law, companies with headquarters in Ireland can “strip” some of their profits earned by subsidiaries in the United States and send them back to the Ireland company as payments for things like the use of intellectual property, then deduct those payments from their American income taxes. The S.H.I.E.L.D. plan would disallow those deductions for companies based in low-tax countries.
Tax professionals say Mr. Biden’s proposed changes to that law could be difficult to administer. Business groups say they could hamper American companies as they compete on a global scale.
Republicans denounced the plan as bad for the United States economy, with lawmakers on the House Ways and Means Committee saying that “their massive tax hikes will be shouldered by American workers and small businesses.”
coupled with an effort through the Organization for Economic Cooperation and Development to broker a global agreement on minimum corporate taxation, will start a worldwide revolution in how and where companies are taxed. That is in part because the Biden plans include measures meant to force other countries to go along with a new global minimum tax that Ms. Yellen announced support for on Monday.
Treasury Department officials estimate in their report that the proposed changes to the minimum tax, and the implementation of the S.H.I.E.L.D. plan, would raise an estimated $700 billion over 10 years on their own.
Business groups warn the administration’s efforts will hamstring American companies, and they have urged Mr. Biden to wait for the international negotiations to play out before following through with any changes.
Members of the Business Roundtable, which represents corporate chief executives in Washington, said this week that Mr. Biden’s minimum tax “threatens to subject the U.S. to a major competitive disadvantage.” They urged the administration to first secure a global agreement, adding that “any U.S. minimum tax should be aligned with that agreed upon global level.”
However, some companies expressed an openness on Wednesday to some of the changes.
John Zimmer, the president and a founder of Lyft, told CNN that he supported Mr. Biden’s proposed 28 percent corporate tax rate.
“I think it’s important to make investments again in the country and the economy,” Mr. Zimmer said. “And as the economy grows, so too does jobs and so too does people’s needs to get around.”
The Biden administration unveiled its plan to overhaul the corporate tax code on Wednesday, offering an array of proposals that would require large companies to pay higher taxes to help fund the White House’s economic agenda.
The plan, if enacted, would raise $2.5 trillion in revenue over 15 years. It would do so by ushering in major changes for American companies, which have long embraced quirks in the tax code that allowed them to lower or eliminate their tax liability, often by shifting profits overseas. The plan also includes efforts to help combat climate change, proposing to replace fossil fuel subsidies with tax incentives that promote clean energy production.
Some corporations have expressed a willingness to pay more in taxes, but the overall scope of the proposal is likely to draw backlash from the business community, which has benefited for years from loopholes in the tax code and a relaxed approach to enforcement.
Treasury Secretary Janet L. Yellen said during a briefing with reporters on Wednesday that the plan would end a global “race to the bottom” of corporate taxation that she said has been destructive for the American economy and its workers.
global minimum tax to 21 percent and toughening it, to force companies to pay the tax on a wider span of income across countries.
That, in particular, has raised concerns in the business community, with Joshua Bolten, chief executive of the Business Roundtable, saying in a statement this week that it “threatens to subject the U.S. to a major competitive disadvantage.”
The plan would also repeal provisions put in place during the Trump administration that the Biden administration says have failed to curb profit shifting and corporate inversions, which involve an American company merging with a foreign firm and becoming its subsidiary, effectively moving its headquarters abroad for tax purposes. It would replace them with tougher anti-inversion rules and stronger penalties for so-called profit stripping.
The plan is not entirely focused on the international side of the corporate tax code. It tries to crack down on large, profitable companies that pay little or no income taxes yet signal large profits to companies with their “book value.” To cut down on that disparity, companies would have to pay a minimum tax of 15 percent on book income, which businesses report to investors and which are often used to judge shareholder and executive payouts.
One big beneficiary of the plan would be the Internal Revenue Service, which has seen its budget starved in recent years. The Biden administration’s proposal would beef up the tax collection agency’s budget so that it can step up enforcement and tax collection efforts.
The annual letter to shareholders by JPMorgan Chase’s chief Jamie Dimon was just published. The widely read letter is not just an overview of the bank’s business but also covers Mr. Dimon’s thoughts on everything from leadership lessons to public policy prescriptions.
“The U.S. economy will likely boom.” A combination of excess savings, deficit spending, a potential infrastructure bill, vaccinations and “euphoria around the end of the pandemic,” Mr. Dimon wrote, may create a boom that “could easily run into 2023.” That could justify high equity valuations, but not the price of U.S. debt, given the “huge supply” soon to hit the market. There is a chance that a rise in inflation would be “more than temporary,” he wrote, forcing the Fed to raise interest rates aggressively. “Rapidly raising rates to offset an overheating economy is a typical cause of a recession,” he wrote, but he hopes for “the Goldilocks scenario” of fast growth, gently increasing inflation and a measured rise in interest rates.
“Banks are playing an increasingly smaller role in the financial system.” Mr. Dimon cited competition from an already large shadow banking system and fintech companies, as well as “Amazon, Apple, Facebook, Google and now Walmart.” He argued those nonbank competitors should be more strictly regulated; their growth has “partially been made possible” by avoiding banking rules, he wrote. And when it comes to tougher regulation of big banks, he wrote, “the cost to the economy of having fail-safe banks may not be worth it.”
“China’s leaders believe that America is in decline.” While the U.S. has faced tough times before, today “the Chinese see an America that is losing ground in technology, infrastructure and education — a nation torn and crippled by politics, as well as racial and income inequality — and a country unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in any coherent way to accomplish national goals,” he wrote. “Unfortunately, recently, there is a lot of truth to this.”
a leveraged buyout offer from the private equity firm CVC Capital, sending its shares to a four-year high. Toshiba has had a series of scandals, and faces pressure from activist investors.
raising the corporate rate to help pay for President Biden’s infrastructure plans — though he didn’t mention the White House’s proposed rate, 28 percent. Other corporate chiefs are privately criticizing the potential tax rise.
The company behind the Johnson & Johnson vaccine mix-up has a history of errors. Emergent BioSolutions, which the U.S. relied on to produce doses by J.&J. and AstraZeneca, had a made manufacturing errors before. Experts worry this may leave some Americans more wary of getting vaccinated, even as Mr. Biden has moved up the eligibility deadline for U.S. inoculations.
An electric aircraft maker sues a rival for intellectual property theft. Wisk, which is backed by Boeing and the Google founder Larry Page, said that former employees downloaded confidential information before joining Archer, a competitor. Archer, which is going public by merging with a SPAC run by Moelis & Company and which counts United Airlines as an investor, denied wrongdoing and said it was cooperating with a government investigation.
A blistering start for venture capital in 2021. Start-ups set a fund-raising quarterly record in the first three months of the year, raising more than $62 billion, according to the MoneyTree report from PwC and CB Insights. That’s more than twice the total a year earlier and represents nearly half of what start-ups raised in all of 2020.
Why is the Amazon union vote taking so long?
Voting in the union election at an Amazon warehouse in Bessemer, Ala., ended on March 29, and counting began the next day, but the outcome is still unknown. What’s going on? It’s less about the number of ballots than how they’re counted.
The stakes are high, for both Amazon and the labor movement. Progressive leaders like Bernie Sanders have argued a victory for the union, the first at an Amazon facility in the U.S., could inspire workers elsewhere to unionize. And Amazon is facing increased scrutiny for its market power and labor practices.
a painstaking process:
Once Amazon and the union have gone back and forth over disputed voters, the N.L.R.B. counts the uncontested ballots anonymously and by hand, on a video conference open to reporters. This could start today.
“Economic fortunes within countries and across countries are diverging dangerously.”
— Kristalina Georgieva, the managing director of the I.M.F., on how the uneven rollout of vaccines poses a threat to the global economic recovery.
Credit Suisse’s expensive mistakes
After the 2008 financial crisis, Credit Suisse emerged battered by high-risk bets and promised to do better. A series of recent scandals suggests it hasn’t, The Times’s Jack Ewing writes.
A recap of the Swiss bank’s troubles over the past year or so:
A spying scandal that led to the ouster of Tidjane Thiam as C.E.O.
Ties to Greensill Capital, the SoftBank-backed lender that has filed for insolvency and will lead to losses at the Swiss bank.
Its involvement with Archegos, whose hugely leveraged stock bets went south, saddling the bank with a big hit.
30-day comment period on to-be-drafted regulations that would make it harder to obscure who controls a company. Among the details to be worked out are what entities should report and when; how to collect, protect and update information for a database; and the criteria for sharing with law enforcement.
“We could not be more excited,” Kenneth Blanco, the director of the Treasury’s Financial Criminal Enforcement Network (FinCEN), told bankers recently. The U.S. has been under pressure to address its vulnerability to money laundering and financial crimes:
In 2016, the international Financial Action Task Force gave the country a failing grade on transparency of company ownership.
In 2018, banks and financial institutions began having to collect that information from clients to help law enforcement identify individuals.
In January, Congress passed the Corporate Transparency Act, which requires businesses to report ownership to the government.
New rules could make forming small businesses, special purpose vehicles and other closely held entities “significantly” more burdensome, said Steve Ganis of Mintz, an expert in anti-money laundering regulation. “FinCEN’s new regime will make things much more complicated for start-ups, where control and ownership are highly fluid,” he said. Public companies and many larger businesses would be exempt because they already face stricter scrutiny.
THE SPEED READ
Flipkart, the Indian e-commerce company owned by Walmart, is reportedly planning to go public through an I.P.O. this year. (Bloomberg)
Grab, the Singaporean tech giant, is near a deal to merge with a SPAC backed by Altimeter Capital at a $35 billion valuation. It would be the biggest-ever blank check deal. (FT)
Fox sued the owner of FanDuel over the price of its option to buy a stake in the sports betting service. (CNBC)
Politics and policy
Coinbase, whose direct listing is set for next week, said it collected more revenue in the first quarter this year than in all of 2020. (CNBC)
The audio chat start-up Clubhouse is said to be raising funds at a $4 billion valuation. (Bloomberg)
The S.E.C. accused an actor of running a $690 million Ponzi scheme built around false claims of deals with Netflix and HBO. (Bloomberg)
Best of the rest
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As vaccination rates increase and businesses start to reopen, cities across the country are cautiously moving forward with economic recovery plans to coax workers back into offices and revive real estate markets pummeled by the pandemic.
Some midsize cities — like Austin, Texas; Boise, Idaho; and Portland, Ore. — may be poised to rebound faster than others because they have developed strong relationships with their local economic development groups. These partnerships have established comeback plans that incorporate a number of common goals, like access to affordable loans, relief for small businesses and a focus on downtown areas.
The partnerships are also encouraging investments in infrastructure as lures for new business activity. Last Wednesday, President Biden announced a $2 trillion infrastructure plan to modernize the nation’s bridges, roads, public transportation, railways, ports and airports.
“Recovery plans create an agenda for rebuilding the metropolitan area,” said Richard Florida, professor at the University of Toronto, who helped prepare a plan for northwest Arkansas.
Google, Microsoft, Target and Twitter about remote work, and some cities could see less office construction activity.
These challenges are not limited to midsize cities. Larger metropolitan areas like Los Angeles and New York are certainly in distress, but they have shown the capacity in the past to rebound from calamity. In San Francisco, municipal authorities said that there was no way to predict postpandemic construction activity but that expectations were high.
“This isn’t the first recession here,” said Ted Egan, San Francisco’s chief economist. “We’re expecting people to come back to the office.”
But the cities that have a strong alliance with business development agencies are expected to recuperate faster.
For instance, the Downtown Austin Alliance, a business development group, is convening focus groups and workshops, and conducting interviews and surveys to stir fresh interest in its downtown office market. Before the pandemic, 11 buildings encompassing roughly 3.5 million square feet were under construction, nearly half of all downtown office space.
Boise established a 16-member Economic Recovery Task Force made up of city officials, academics and executives of professional organizations. In September, it issued recommendations to “enhance economic resilience and agility.”
And the Greater Portland Economic Development District formed a partnership with the Metro Regional Government to prepare a plan to recover from the economic shock of the pandemic, which wiped out 140,000 jobs and shuttered 30 percent of the region’s small businesses. Among their recommendations is todirect funds and technical assistance to small businesses through local Community Development Financial Institutions, part of an affordable-lending program from the Treasury Department.
Some cities are already seeing success. A year ago, Boston abruptly suspended construction for nine weeks in an effort to halt the spread of the coronavirus. During the moratorium, the Boston Planning and Development Agency prepared a recovery plan that focused on reviewing permit decisions for major projects remotely. With its 250-member staff working from home, and in some cases outfitted with new software and digital equipment, the planning agency held 220 virtual public meetings and digitally reviewed architectural plans and land-use proposals.
“We identified a methodology to conduct our reviews and resume public participation,” said Brian P. Golden, the agency’s director. “Honestly, it worked better than we could reasonably have expected.”
The city approved 55 significant development projects last year encompassing 15.8 million square feet and valued at $8.5 billion, the most in Boston’s history. The largest was $5 billion Suffolk Downs, a 10-million-square-foot, mixed-use development with 10,000 housing units rising on a shuttered horse-racing track.
Tucson is also intent on resuming construction. Along with identifying sites for industrial development, the Sun Corridor recovery plan calls for resuscitating the city’s downtown.
The pandemic closed 85 downtown restaurants, eliminated 10,000 travel and tourism jobs and cut revenue in the sector by $1 billion. The antidote is to persuade city and county leaders to make loans and grants available to small businesses tied to the tourism industry, the focus of commercial space in central Tucson.
Mayor Regina Romero said the city was investing $5 million — $2 million more than last year — in the city’s tourism marketing group. Tucson also distributed $9 million from the federal relief legislation passed in March 2020 in grants ranging from $10,000 to $20,000 to small businesses, many of them in tourism.
“We’re working together as a region,” Ms. Romero said. “That’s one of the most important steps that we can take for the recovery.”
Treasury Secretary Janet L. Yellen made the case on Monday for a global minimum tax, kicking off the Biden administration’s effort to help raise revenue in the United States and prevent companies from shifting profits overseas to evade taxes.
Ms. Yellen, in a speech to the Chicago Council on Global Affairs, called for global coordination on an international tax rate that would apply to multinational corporations regardless of where they locate their headquarters. Such a global tax could help prevent the type of “race to the bottom” that has been underway, Ms. Yellen said, referring to countries trying to outdo one another by lowering tax rates in order to attract business.
Her remarks came as the White House and Democrats in Congress begin looking for ways to pay for President Biden’s sweeping infrastructure plan to rebuild America’s roads, bridges, water systems and electric grid.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Ms. Yellen said. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
will release a new plan on Monday to overhaul the way the United States taxes multinational corporations. In addition to raising revenue, the proposal, which is co-authored by Senator Sherrod Brown of Ohio and Senator Mark Warner of Virginia, seeks to discourage companies from shifting profits and jobs to low-tax countries to avoid paying taxes in America. It also creates new incentives through the tax code for companies to invest in research and manufacturing in the United States.
The speech represented Ms. Yellen’s most extensive comments since taking over as Treasury secretary, and she underscored the scope of the challenge ahead.
“Over the last four years, we have seen firsthand what happens when America steps back from the global stage,” Ms. Yellen said. “America first must never mean America alone.”
Ms. Yellen also highlighted her priorities of combating climate change and reducing global poverty and underscored the importance of the United States helping to lead the world out of the crisis caused by the pandemic. Ms. Yellen called on countries not to pull back on fiscal support too soon and warned of growing global imbalances if some countries do withdraw before the crisis is over.
The slow pace of the deployment of vaccines around the world is also a concern for Ms. Yellen, who lamented that many developing and middle-income countries have been unable to invest in robust rollouts of inoculations, which could hurt the global economy.
“The result will likely be a deeper and longer-lasting crisis, with mounting problems of indebtedness, more entrenched poverty, and growing inequality,” Ms. Yellen said, estimating that as many as 150 million people could be pushed into extreme poverty this year. “This would be a profound economic tragedy for those countries, one we should care about.”
In a sharp break with the administration of former President Donald J. Trump, Ms. Yellen emphasized the importance of the United States working closely with its allies, noting that the fortunes of countries around the world are intertwined.
Overhauling the international tax system is a big part of that. Corporate tax rates have been falling around the world in recent years. Under the Trump administration, the rate in the United States was cut from 35 percent to 21 percent. Mr. Biden wants to raise that rate to 28 percent and increase the international minimum tax rate that American companies pay on their foreign profits to 21 percent.
The Organization for Economic Cooperation and Development, in coordination with the United States, has been working to develop a new international tax architecture that would include a global minimum tax rate for multinational corporations as part of its effort to curtail profit shifting and tax base erosion.
Ms. Yellen said she is working with her counterparts in the Group of 20 advanced nations on changes to the global tax system that will help prevent businesses from shifting profits to low-tax jurisdictions.
“President Biden’s proposals announced last week call for bold domestic action, including to raise the U.S. minimum tax rate, and renewed international engagement, recognizing that it is important to work with other countries to end the pressures of tax competition and corporate tax base erosion,” Ms. Yellen said. “We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom.”
Washington’s robust spending in response to the coronavirus crisis is helping to pull the United States out of its sharpest economic slump in decades, funneling trillions of dollars to Americans’ checking accounts and to businesses.
Now, the rest of the world is expected to benefit, too.
Global forecasters are predicting that the United States and its record-setting stimulus spending could help to haul a weakened Europe and struggling developing countries out of their own economic morass, especially when paired with a rapid vaccine rollout that has poised the U.S. economy for a faster recovery.
As Americans buy more, they should spur trade and investment and invigorate demand for German cars, Australian wine, Mexican auto parts and French fashions.
The anticipated economic rebound in the United States is expected to join China’s recovery, adding impetus to world output. China’s economy is forecast to expand rapidly this year, with the International Monetary Fund predicting 8.1 percent growth. That is good news for countries like Germany, which depends on Chinese demand for cars and machinery.
just begun to push infections higher in the United States — and a large policy response, including more than $5 trillion in debt-fueled pandemic relief spending passed into law over the past 12 months. Those trends, paired with the accelerating spread of effective vaccinations, seem likely to leave the American economy in a stronger position.
“When the U.S. economy is strong, that strength tends to support global activity as well,” Jerome H. Powell, the chair of the Federal Reserve, said at a recent news conference.
A year ago, it was not at all certain that the United States would gain the strength to help lift the global economy.
International Monetary Fund forecast in April 2020 that the U.S. economy might expand by 4.7 percent this year, roughly in line with forecasts for Europe’s growth, following an expected slump of 5.9 percent in 2020. But the actual contraction in the United States was smaller, and in January, the I.M.F. upgraded the outlook for U.S. growth to 5.1 percent this year, while the euro area’s expected growth was marked down to 4.2 percent.
I.M.F. has signaled that the estimates for the country’s growth will be marked up further when it releases fresh forecasts on April 6.
The recent relief package continues a trend: America has been willing to spend to combat the pandemic’s economic fallout from the start.
America’s initial pandemic response spending, amounting to a little less than $3 trillion, was 50 percent larger, as a share of G.D.P., than what the United Kingdom rolled out, and roughly three times as much as in France, Italy or Spain, based on an analysis by Christina D. Romer at the University of California, Berkeley.
Among a set of advanced economies, only New Zealand has borrowed and spent as big a share of its G.D.P. as the United States has, the analysis found.
In Europe, where workers in many countries were shielded from job losses and plunging income by government furlough programs, the slow pace of the European Union’s vaccination campaign will probably hurt the economy, said Ludovic Subran, the chief economist of German insurance giant Allianz.
On Wednesday, France announced its third national lockdown as infected patients fill its hospitals.
Mr. Subran also questioned whether the European Union can distribute stimulus financing fast enough. The money from a 750 billion euro, or $880 billion, relief program agreed to by European governments last July has been slow to reach the businesses and people who need it because of political squabbling, creaky public administration and a court challenge in Germany.
administered only about 1 vaccine dose per 1,000 people, if that, based on New York Times data. In the United States, the rate is more than 400 doses per 1,000 people.
Still, a booming American economy poses some hazard to other nations — and especially emerging markets — as economic fates diverge.
Market-based interest rates in the United States are already climbing, as investors, sensing faster growth and quicker inflation around the corner, decide to sell bonds. That could make financing more expensive around the globe: If investors can earn higher rates on U.S. bonds, they are less likely to invest in foreign debt that offers either lower rates or higher risk.
If the United States lures capital away from the rest of the world, “the rose-colored view that we are helping everyone is very much in doubt,” said Robin Brooks, chief economist at the Institute of International Finance.
trade tensions with Europe, which the Trump administration treated like an adversary. President Biden met online with European leaders last week.
The U.S. stimulus packages “will be part of the water that lifts all boats,” Selina Jackson, senior vice president for global government relations and public policy at consumer products company Procter & Gamble, said during a recent panel discussion organized by the American Chamber of Commerce to the European Union. “We are hoping for a calm slide out of this economic situation.”
Almost nine years ago, Bristol Myers Squibb filed paperwork in Ireland to create a new offshore subsidiary. By moving Bristol Myers’s profits through the subsidiary, the American drugmaker could substantially reduce its U.S. tax bill.
Years later, the Internal Revenue Service got wind of the arrangement, which it condemned as an “abusive” tax shelter. The move by Bristol Myers, the I.R.S. concluded, would cheat the United States out of about $1.4 billion in taxes.
That is a lot of money, even for a large company like Bristol Myers. But the dispute remained secret. The company, which denies wrongdoing, didn’t tell its investors that the U.S. government was claiming more than $1 billion in unpaid taxes. The I.R.S. didn’t make any public filings about it.
And then, ever so briefly last spring, the disputebecame public. It was an accident, and almost no one noticed. The episode provided a fleeting glimpse into something that is common but rarely seen up close: how multinational companies, with the help of elite law and accounting firms and with only belated scrutiny from the I.R.S., dodge billions of dollars in taxes.
infrastructure plan that the White House unveiled on Wednesday proposed increasing the minimum overseas tax on multinational corporations, which would reduce the appeal of such arrangements.)
For the three years leading up to 2012, Bristol Myers’s tax rate was about 24 percent. The U.S. corporate income tax rate at the time was 35 percent. (It is now 21 percent.)
The company wanted to pay even less.
In 2012, it turned to PwC, the accounting, consulting and advisory firm, and a major law firm, White & Case, for help getting an elaborate tax-avoidance strategy off the ground. PwC had previously been Bristol Myers’s auditor, but it was dismissed in 2006 after an accounting scandal forced Bristol Myers to pay $150 million to the U.S. government. Now PwC, with a long history of setting up Irish tax shelters for multinational companies, returned to Bristol Myers’s good graces.
sided with the agency after it challenged a similar maneuver by General Electric using an offshore subsidiary called Castle Harbour. The I.R.S. also contested comparable setups by Merck and Dow Chemical.
The Bristol Myers arrangement “appears to be essentially a copycat shelter,” said Karen Burke, a tax law professor at the University of Florida. Since the I.R.S. was already fighting similar high-profile transactions, she said, “Bristol Myers’s behavior seems particularly aggressive and risky.”
The next January, the company announced its 2012 results. Its tax rate had plunged from nearly 25 percent in 2011 to negative 7 percent.
On a call with investors, executives fielded repeated questions about the drop in its tax rate. “Presumably, all drug companies try to optimize their legal entities to take their tax rate as low as they can, yet your rate is markedly lower than any of the other companies,” said Tim Anderson, an analyst at Sanford C. Bernstein & Company. “So I’m wondering why your tax rate might be unique in that regard?”
Charlie Bancroft, the company’s chief financial officer, wouldn’t say.
The more than $1 billion in tax savings came at an opportune moment: Bristol Myers was in the midst of repurchasing $6 billion worth of its own shares, an effort to lift its stock price. By January 2013, it had spent $4.2 billion. The cash freed up by the tax maneuver was enough to cover most of the remainder.
Tax Notes, a widely read trade publication, had also posted the document. When the I.R.S. provided a clean version, Tax Notes took down the original.
An I.R.S. spokesman declined to comment.
Cara Griffith, the chief executive of Tax Analysts, the publisher of Tax Notes, said the publication erred “on the side of not publishing confidential taxpayer information that was accidentally released through an error in redaction, unless it reaches a very high threshold of newsworthiness.”
David Weisbach, a former Treasury Department official who helped write the regulations governing the tax-code provision that Bristol Myers is accused of violating, agreed. PwC and White & Case “are giving you 138 pages of legalese that doesn’t address the core issue in the transaction,” he said. “But you can show the I.R.S. you got this big fat opinion letter, so it must be fancy and good.”
The current status of the tax dispute is not clear. Similar disputes have spent years winding through the I.R.S.’s appeals process before leading to settlements. Companies often agree to pay a small fraction of what the I.R.S. claims was owed.
“There is a real chance that a matter like this could be settled for as little as 30 percent” of the amount in dispute, said Bryan Skarlatos, a tax lawyer at Kostelanetz & Fink.
In that case, the allegedly abusive tax shelter would have saved Bristol Myers nearly $1 billion.
President Biden’s ambitious plan to increase corporate taxes does more than just reverse much of the overhaul pushed through by his predecessor. It also offers a profoundly different vision of how to make the United States more competitive and how to foot the bill.
When President Donald J. Trump and a Republican Congress rewrote the tax code in 2017, most of the benefits went to the wealthiest Americans, with lower rates on businesses and on profits from investments. The guiding principle, proponents argued, was that cutting taxes on corporations and investors would encourage businesses to expand, creating more jobs and generating more wealth for everyone.
By contrast, the animating idea behind the tax plan put forward by the Biden administration on Wednesday is that the best way to increase America’s competitiveness and foster economic growth is to raise corporate taxes to finance huge investments in transportation, broadband, utilities and more.
The Business Roundtable, the U.S. Chamber of Commerce and the National Association of Manufacturers all welcomed the idea of pumping money into repairing and building the nation’s infrastructure, but recoiled at raising corporate taxes to do so.
said in a statement.
The biggest and most eye-catching proposal is to trim the sizable reduction in the corporate tax rate enacted under Mr. Trump. In 2017, Republicans shrank the rate to 21 percent from 35 percent. Mr. Biden wants to nudge the rate part of the way back — to 28 percent.
The increase will “ensure that corporations pay their fair share of taxes,” and fund critical investments “to maintain the competitiveness of the United States and grow the economy,” the White House stated in outlining the plan.
The other provisions are primarily intended to ensure that multinational corporations cannot avoid taxes on profits generated overseas. The hope is that this will reduce the temptation to set up operations or offices in foreign tax havens.
Wall Street has been wary of possible tax increases since the presidential election and has hoped that gridlock in Washington would moderate Mr. Biden’s agenda. On Wednesday, a spokesman for JPMorgan Chase said the bank’s chief executive, Jamie Dimon, believed that “the corporate tax rate for companies in the U.S. has to be competitive globally, which it is now.”
Supporters countered that the changes would do much more to promote growth and go a long way in curbing excesses of the 2017 tax legislation. Democrats have argued that the low-tax approach has failed to deliver broad economic gains, with only those at the very top benefiting. Targeted government spending on workers, students and infrastructure, they argue, would offer much more bang for the buck. What’s more, businesses base their decisions on a range of factors besides tax rates.
Even economists favoring low rates on business acknowledge that the 2017 tax cuts did not produce much of an increase in investment. Gross domestic product grew at a rate of 2.4 percent in the two years leading up to the law and 2.4 percent in the two years after it passed.
“There’s essentially no evidence that the tax change boosted investment,” said William Gale, co-director of the Urban-Brookings Tax Policy Center. He argued that investment went up in 2018 only because oil prices rose. And while the tax law favored investments in equipment and structures, it turned out that the biggest investments were not in those areas but in intellectual capital.
11.3 percent on their 2018 income.
pass through income to their owners or shareholders. (They pay taxes at the ordinary rate on their individual returns.)
The Biden administration has indicated that tax increases for the wealthy will help fund the second phase of the infrastructure plan, which is expected to be announced next month and will focus on priorities like education, health care and paid leave.
Gillian Friedman and Lauren Hirsch contributed reporting.