Jamie Dimon, Chairman and CEO of JPMorgan Chase, testifies about JPMorgan Chase's trading loss during a US House Financial Services Committee hearing on Capitol Hill in Washington, DC on June 19, 2012.
Saul Loeb | AFP | Getty Images
Jamie Dimon, CEO of JPMorgan Chase, and Jane Fraser, head of Citigroup, on Thursday expressed concern about President Joe Biden's efforts to increase the level of taxes companies pay on foreign profits and the aim of achieving one set global minimum corporate tax rate.
Dimon testified before the House Financial Services Committee that a plan to raise the US tax rate on foreign profits to 21% could, over time, encourage companies to move business overseas. Dimon believes the shift could accelerate if the allies fail to keep their promises to introduce a similar global minimum tax rate.
"I think America would be the only country in the world that had something called a global tax rate," he said, referring to the proposed rate of 21% on US corporations' foreign income.
"I have no question that on the fringes … capital, and ultimately the brain, will drive R&D and investment overseas," 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 therefore the US could be put in a position to be less competitive globally."
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 to convince Germany, France and others to back the plan, contends 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 on the protocol.
Treasury Secretary Janet Yellen said the current system is an incentive for countries to offer lower effective business rates over time to attract businesses in different regions.
But Dimon and others have expressed doubts about the possibility of long-term success in convincing US counterparts to meet a global minimum of 15% or some other level, especially if it might be more lucrative for governments to improve the system by offering backdoor Incentives to cheat or completely disregard the agreement.
A JPMorgan spokesman said the concern was that the US would impose a relatively high tax on foreign income at 21% just to allow foreign partners to evade their own tax pledges. This scenario could put the US at a competitive disadvantage and encourage the offshoring of factories, profits and workers.
Finance has reiterated that the 15% suggestion should be viewed as some kind of floor and that subsequent discussions could ultimately drive it up. In theory, this could help reduce a tax disadvantage.
That the White House is trying to persuade others to implement a global minimum tax is not necessarily surprising, given the amount of spending it would like to see to meet its agenda priorities.
The American employment plan would pour $ 2.3 trillion over a decade into traditional infrastructure, along with scientific innovations, paying for household help, and building 500,000 electric vehicle charging points.
The GOP countered Thursday with its own version, a more modest $ 928 billion proposal, with a focus on "hard" infrastructures 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 welfare programs such as paid family vacations, free early childhood education, and free community college.
Biden's 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 fight 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's CEOs appeared before the U.S. Senate Committee on Banking, Housing and Urban Affairs Wednesday.
An irritated exchange from that hearing took place between Senator Elizabeth Warren, D-Mass., And Dimon. Warren accused JPMorgan Chase and the other consumer banks for not doing enough to inform its client about the relaxation of certain rules on overdraft fees during the coronavirus outbreak.
Dimon countered that the bank had accepted customers who had made qualified requests for exemption from overdraft fees and that in 2020 the bank would not refund billions it had raised in such fees.