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Japan backs new IMF allocation, U.S. calls for minimum corp tax

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

FILE PHOTO: Japan's Deputy Prime Minister and Finance Minister Taro Aso, wearing a protective face mask, delivers his policy speech at the opening of an ordinary session of the parliament in Tokyo, Japan January 18, 2021. REUTERS/Issei Kato/File Photo

Support for low-income countries is among the topics on the agenda at the G7 and G20 meetings, which will be held on Tuesday and Wednesday respectively on the sidelines of the IMF’s spring meetings.

Other issues include the outlook for the world economy, COVID responses, international taxation, global warming, green and digital innovation.

Japan has backed a $650 billion increase in IMF’s SDRs - which are special monetary reserves that can be turned into hard currencies by members or shared with needier countries.

The G20 major economies are expected to extend debt relief to developing countries by another six months to the year-end, while providing various other measures to alleviate the debt burdens.

“There would be no point to it if SDR expansion is used for paying back debts to China,” Aso told reporters after a cabinet meeting, repeating criticism against China’s lending practice to low-income countries.

Speaking on the eve of a virtual gathering of financial leaders from the Group of Seven rich nations and the G20 major economies this week, Aso welcomed U.S. Treasury Secretary Janet Yellen’s calls for the introduction of a global minimum corporate tax rate.

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

“This was a step forward towards a global solution to international taxation,” Aso said, adding that Japan has been urging other countries not to engage in competitive reductions in global corporate tax rates.

Japan has cut its corporate tax rates to just below 30%, while the United States lowered its own to 21% amid a global race to offer attractive corporate tax rates over the past several years.

The Biden plan proposes a 21% minimum corporate tax rate, coupled with eliminating exemptions on income from countries that do not enact a minimum tax. The administration says the plan will discourage the shifting of jobs and profits overseas.

Without a global minimum, the United States would again have higher rates than a number of other major economies, tax experts say, while the U.S. proposal could help jump-start negotiations for a tax deal among these economies.

Reporting by Tetsushi Kajimoto; additional reporting by Takaya Yamaguchi; Editing by Christian Schmollinger & Shri Navaratnam