Economic Observer Network reporter Du Tao The global minimum tax rate plan proposed by the OECD will be implemented, and both global tax havens and low-tax countries may be affected.
According to Xinhua News Agency, the Finance Ministers and Governors of the Central Bank of the Group of Twenty (G20) concluded a two-day meeting in the northern Italian city of Venice on the 10th. Representatives of various countries discussed issues such as global economy and health, promotion of economic recovery, and transition to a green and sustainable economy and society, and agreed to continue to promote global tax reforms in order to set the global minimum tax rate for multinational companies.
Prior to this, the finance ministers of the Western Group of Seven (G7) countries negotiated and issued a statement on tax reform in London, England, supporting the setting of the global minimum corporate tax rate of 15% to end decades of low-tax competition; on the other hand, Countries are allowed to levy taxes on the profits of super enterprises that do not have physical businesses but have digital businesses, but the relevant countries will abolish the current unilateral digital service tax.
The minimum tax rate is mainly for tax avoidance measures such as transfer pricing, which is equivalent to a minimum tax rate in the global anti-avoidance measures, and the corporate income tax of all countries in the world cannot be lower than a certain tax rate. This time, G7 and G20 proposed to support setting the global minimum corporate tax rate to 15%, which will have a considerable impact on tax havens and the low tax rates enjoyed by large international companies in tax havens.
On July 12, Cao Mingxing, director of the International Taxation Research Center of Central University of Finance and Economics, believes that both the traditional tax havens of the Virgin Islands, Cayman Islands, and Bermuda, or countries with low tax rates such as Singapore and Ireland will be affected, and may even be affected. Be terminated. “The minimum tax rates are for the above two types of countries and regions, and they have a great impact on them. Therefore, some countries and regions with low tax rates have not yet joined the above framework agreement.”
Ye Yongqing, a partner of King & Wood Mallesons, told reporters that the gradual implementation of Pillar 2 (the lowest global tax rate) is a major reform of the global tax system, from a single country competition to a coordinated national distribution mechanism. It turns out that the tax system is under the sovereignty of a country, and each country sets its own tax system. For example, Singapore’s low tax rate, Cayman and other tax havens have zero tax rates. After setting the global minimum tax rate, it is equivalent to the virtual requirement of a unified tax system, and in order to protect the distribution mechanism of the state and enterprises in the tax system, in other words, how much money the government takes from multinational companies as a whole will be a fixed number.
“Of course, the minimum tax rate is also a very complicated arrangement. There is still competition between countries and regions. It is difficult to completely replace or unify. For example, how to calculate the effective tax rate and effective tax burden in the minimum tax rate is a big problem? How to calculate the fiscal subsidy It remains to be seen and analyzed whether there will be a shift from tax competition to fiscal competition in the future.”
The impact of the implementation of the minimum tax rate on China is still unclear. The corporate income tax rate in China is 25%, which is higher than the minimum tax rate of 15%. Ye Yongqing told reporters that there may be some impact on China’s tax system, and there are also discussions in the industry. After all, there are some preferential tax policies in China, which may cause the actual tax burden of enterprises to be lower than 15%. Under the lowest tax rate, how to deal with it, whether to switch to financial subsidies, etc. Secondly, there are some special places in China, such as the tax design of the Hainan Free Trade Zone, which also needs to consider the impact of the minimum tax rate.
Tax restructuring
In response to the tax challenges posed by the digital economy, the Organization for Economic Cooperation and Development (OECD) launched the Tax Base Erosion and Profit Shifting (BEPS) project in July 2013. On January 31, 2020, the OECD/G20BEPS Inclusive Framework released the ” The Statement on the “Two Pillars” Plan to Address the Challenges of Digital Economy Taxation (hereinafter referred to as the “Statement”), plans to reach an agreement on the taxation plan for the digital economy by the end of 2020, which means that multinational companies need to start evaluating new rules as soon as possible. The influence of global organization structure, supply chain and business model.
Its two pillars are the “Unified Approach” as the basic framework to solve the problem of redistribution of global taxation rights and the problem of multinational corporations’ profit transfer and tax base erosion through the global minimum tax rules.
On July 10, the third meeting of G20 finance ministers and central bank governors closed in Venice, Italy, and issued a communiqué stating that a historic agreement had been reached on a more stable and fairer international taxation framework.
Cao Mingxing believes that this is a century-long tax reform, which has a huge impact on countries around the world. “It used to be national taxation. In the past, international taxation was an excessive concept. Landing was still national taxation. Now it forms the basis of a contracted global uniform tax rate. In the case of the lowest tax rate in the world, there is no global national sovereignty.”
Cao Mingxing has been tracking the OECD’s tax reform in recent years. He told reporters that the G20’s proposal to set a minimum tax rate is a correction for global taxation rights.
An international tax official told Economic Observer that the minimum tax rate sets a minimum line for global income taxes, which to a certain extent solves the problem of competition at the bottom. It is of great significance to alleviate the fiscal gap of various countries and promote economic recovery in the post-epidemic era. . In particular, coordinating tax policies among such a wide range of countries, taking into account the demands of developing countries, has obvious exemplary significance, and also provides a framework for the subsequent coordination of other tax systems or collection and management policies across countries.
Tax officials in the above-mentioned countries further explained that the setting of global tax rates is mainly aimed at the challenges of the digital economy. In the OECD, India has previously promoted significant economic presence, the United States has proposed marketing intangible assets, the United Kingdom has proposed user participation, and Germany has proposed the world‘s lowest tax rate. Later, the problems of India, the United States, and the United Kingdom formed pillar one, and the minimum tax rate proposed by Germany became pillar two.
According to the G7 statement, negotiations will continue within the inclusive framework of the G20 Leaders Summit held in October and the Organization for Economic Cooperation and Development, with a view to reaching a final agreement.
The OECD, which proposed the minimum tax rate plan, issued an announcement on July 1 stating that 130 countries and jurisdictions around the world have joined a new two-pillar plan, accounting for more than 90% of global GDP, to reform international tax rules and ensure that multinational companies are Any local operation pays a fair share of taxes.
The end of tax havens?
The proposal of the minimum tax rate has been affected but it is not just a tax haven.
Cao Mingxing told reporters that the gradual landing of Pillar 2 has actually benefited Europe and the United States. The two-pillar action plan has always been promoted by the European Union and has transformed its own requirements into rules. The United States wants to create global tax barriers, that is, to prevent capital and industry from flowing freely between low tax burdens. It is good for developed economies, but it is detrimental to developing countries.
In terms of tax havens, Cao Mingxing believes that traditional tax havens will be hit hard. They are tax-free or low-tax areas, which are set by the OECD framework as harmful tax competition and will naturally be hit. And theoretically, under the premise that countries have reached an agreement on the minimum tax rate, if the tax rate paid by a company in a certain country is lower than the minimum tax rate, the home country government can increase it to the agreed minimum tax rate level.
According to public media reports, a research report issued by the Bank of China Research Institute shows that for a long time, major global economies have adopted low corporate tax rates as an important means of attracting international investment, expanding the scale of local companies and employment rates, and even launching “competition to the bottom”. “. Since 2001, the global average corporate tax rate has dropped from 27% to 20.2%. Regardless of whether it is the G20 group, OECD economies or non-OECD economies, the corporate tax rate has maintained a steady downward trend. Among them, the OECD economy has the largest decline, with a decline of 7.88 percentage points; non-OECD member countries have a smaller decline, with a decline of 6.23 percentage points; The rate of decline for G20 members was 6.92 percentage points.
Previously, American technology companies have been criticized by public opinion and government investigations and fines for tax avoidance in European countries. The European Union requires Apple to pay the Irish government $14 billion in historical tax arrears, believing that the ultra-low tax rate that Apple enjoys in the country is unfair. The United Kingdom, France, Italy and other countries have successively introduced digital service taxes.
Ye Yongqing told reporters that for countries and regions that have actual tax revenues and significantly lower tax burdens, such as Singapore and Ireland, multinational companies generally use these places for profit retention and capital management under low tax conditions. These regions and countries will be greatly affected after the world‘s lowest tax rate is implemented, because these regions used to set up structures around low tax rates.
For example, Ye Yongqing, for example, a US company whose profits are in Singapore, and the income tax rate is low in Singapore. If it is lower than 15%, the US will levy a portion of less than 15%. But if the income tax rate in the United States is higher than 15%, then the profits of multinational companies may not be transferred back to the United States. This involves the issue of income tax rates in various countries. Among the major economies in the world, the corporate income tax rates of France, the United Kingdom, Germany, Italy, the United States, Japan and other countries are all higher than 15%.Return to Sohu to see more
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