Japan Finance Minister backs new SDR allocation, U.S. calls for minimum corporate tax

From Tetsushi Kajimoto

TOKYO (Reuters) – Japan will agree on a new allocation of special drawing rights (SDRs) as long as the International Monetary Fund and the World Bank ensure transparency in providing increased money for poor countries, Finance Minister Taro Aso said on Tuesday.

“It will not make sense if the SDR expansion is used to pay off debts to China,” Aso told reporters after a cabinet meeting, echoing tacit criticism of China’s practice of lending to low-income countries.

Japan has backed a $ 650 billion increase in IMF cash reserves.

Speaking on the eve of a virtual gathering of G20 financial leaders and major economies this week, Aso welcomed US Treasury Secretary Janet Yellen’s calls for a global minimum corporate tax rate.

The proposal is a key pillar of President Joe Biden’s $ 2 trillion infrastructure spending plan, which proposes raising the U.S. corporate tax rate to 28 percent while eliminating some deductions related to overseas profits.

“It was a step towards a global solution to international taxation,” Aso said, adding that Japan was urging other countries not to compete to the bottom of global corporate tax rates.

Biden’s plan proposes a minimum corporate tax rate of 21%, along with eliminating income exemptions for countries that do not introduce a minimum tax. The administration says the plan will discourage job relocations and profits abroad.

Without a global minimum, the United States would again have higher rates than a number of other major economies, tax experts say, while the US proposal could help start negotiations on a tax deal between the major economies.

(Report by Tetsushi Kajimoto; Edited by Christian Schmollinger & Shri Navaratnam)