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Global minimum tax should take into account the benefits of developing countries


Illustration: Tang Tengfei / GT

G20 finance ministers and central bank governors are expected to hold their third meeting under Italy’s G20 presidency on Friday and Saturday in Venice, Italy. Among programs that include promoting a post-COVID recovery and more sustainable growth, the issue of the global minimum corporate tax is expected to gain wide attention.

Since the financial leaders of the G7 countries agreed to support a new global minimum tax rate of at least 15% on June 5, it has sparked debate among economies around the world. While the G7 economies strongly support the deal, some developing economies refuse to support the proposal. This week’s G20 finance ministers meeting will go a long way in determining whether the proposal can garner broad support from major developing economies.

Although the Paris-based Organization for Economic Co-operation and Development (OECD) said 130 countries agreed to a conceptual framework including a minimum 15% corporate tax rate, which had proposed by the United States, some finance officials from G20 member countries have spoken. against the engagement before the meeting, according to media reports.

Martín Guzmán, Argentina’s finance minister, said the minimum rate of 15 percent is far too low. When the G20 meets in Venice, Argentina will advocate for a higher minimum tax rate of at least 21, Forbes reported on June 30. Developing countries outside the G20 are likely to push for an even higher minimum tax rate, according to the report.

From the point of view of protecting the functioning of businesses and combating unreasonable tax avoidance, the comprehensive minimum tax proposal will play a positive role. Under the model of the Global Corporate Minimum Tax Agreement, multinational corporations would pay an appropriate share of tax wherever they operate, which will prevent countries from attracting multinational corporations with unreasonable tax rates. .

However, by proposing a global minimum tax, the goal of the major developed economies, led by the United States, is essentially to keep more money in their pocket. It is crucial that the agreement does not become a plan to serve the interests of developed countries. Negotiators must further examine the needs of developing countries.

A pattern has become more and more evident. Following a US-led effort in the G7, proposals are then submitted to the G20 for further discussion. When the G7 has reached consensus on certain issues, it is easier to reach agreement at the G20 meeting. Countries should be aware that the United States is trying to influence the G20 by controlling the G7. Whether it is the issue of minimum tax or other issues, the G20 meeting should play a role in further balancing the views of more countries in the discussion process.

Although the negotiations on the global minimum corporate tax rate are in theory simpler and less controversial, before reaching a broad agreement, the demands of developing countries should be taken into account, including by ensuring tax revenues. national and differentiated standards for different industries and business areas.

In any future implementation process, it is suggested that a transition period be set and that each country make its own preparations. At the same time, some developing countries in difficulty should also allow a longer transition time.

Overall, the balance of corporate taxes is a new issue for governments and regulators. While adopting a positive attitude to participate positively in the negotiation of the new agreement, China should also make the necessary preparations. For different sectors and regions, more detailed calculations and assessments need to be undertaken.

In general, the rate of 15% in the world will not have a significant impact on China. The corporate income tax rate in China is 25%. High-tech companies in China enjoy a preferential corporate tax rate of 15%. They will not be affected. For some industries or experimental economic zones currently benefiting from a tax rate below 15 per cent, they may be affected. There should be policy coordination arrangements.

The author is vice-president of the Chinese Society for Studies of the World Trade Organization in Beijing and former president of the research institute of the Chinese Ministry of Commerce. [email protected]


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