Global corporate tax rate
Countries across Asia should join Ireland and other nations and resist calls for a minimum global corporate tax rate that could become a masterclass in the law of unintended consequences.
Ireland's finance minister, Paschal Donohoe, is leading the charge against the US-led attempts to shake up the global tax system.
Countries such as China, for example, will likely adopt a careful stance to global negotiations, considering the tensions between the world's two largest economies, and because of the impact a global minimum corporate tax would have on Hong Kong. Currently, around 70% of overseas investment from mainland China is channeled from the HK Special Administrative Region.
But I believe that there should be a coordinated approach across Asia in order to obtain maximum pushback to the plans.
Discussions have been under way since 2012, with around 140 countries involved. Even though
China is not a member of the
Organization for Economic
Cooperation and Development, it is "fully involved," said Pascal
Saint-Amans, director of the
Center for Tax Policy and
Administration at the OECD.
The plans are flawed, and the lack of flexibility could hinder
Asian countries' ability to implement tax policy to generate much-needed foreign direct investment (FDI). As such, countries not considered especially attractive for investment other than having a low tax regime will be at a crucial disadvantage.
Overseas firms and international agencies would likely relocate elsewhere with comparable low taxes and other significant pull factors, taking their wealth could further disadvantage developing and jobs with them, as well as all economies across Asia. the other socio-economic related If the minimum rate is established, benefits of FDI. a multinational's tax rate Moreover, the United States' in each jurisdiction will be set
for a global minimum tax against that rate, with a top-up
call tax demanded should a lower rate be paid in that jurisdiction. Then the additional tax take will go where the parent company is domiciled.
When you consider that most of the world's major corporations are in developed countries, particularly the US, it looks as though the plans are leaning toward the wishes of those nations, especially the US, the world's largest economy, and not Asia.
Indeed, this was echoed by Zhao Xijun, a professor of finance at Renmin University: "It's a proposal brought forward by the United States, not a Chinese call. If [the US] really wants to create a fair and just environment, it should lower import duties on Chinese goods and investment barriers, rather than maintaining a double standard.
"China of course wants a fair tax environment. Rising protectionism is not good for the global economy. The US should make changes first."
Moreover, the lack of autonomy is another reason a global corporation tax could curtail economic growth.
Of course, every country has its own unique economic attributes and challenges. Under these proposed plans, it would appear unlikely that a country would be able to support key sectors of its economy, such as agriculture or tourism, when required by offering rebates, for example.
Additionally, for several firms, a global minimum corporate tax could potentially increase their costs of doing business across the world.
Surely this isn't the way forward after the Covid-19 pandemic? Each nation will also maintain its own set of complex exemptions and loopholes that would still be utilized by powerful corporations.
To my mind, a global minimum corporate tax rate would do very little to even out the playing field, and would likely only make it worse.