The minimum corporate tax is a small step towards economic fairness

The Organization for Economic Cooperation and Development (OECD) announced last Friday (October 8) that 136 countries and jurisdictions accounting for more than 90% of global GDP have agreed to set the global minimum corporate tax at 15%, including all OECD The organization and the Group of Twenty (G20), countries such as Ireland and Hungary that previously had reservations about the lowest corporate tax in the world are also listed.

It is expected that the G20 summit to be held later this month will be able to pass the relevant agreement.

The current global minimum corporate tax plan will require participating countries to impose at least a 15% tax rate on large multinational companies with annual revenues of more than 20 billion euros and profit margins of more than 10%, such as Google, Amazon, or Facebook.

Advanced countries such as the United States and Europe promote this global initiative to prevent large multinational companies from avoiding taxes. The OECD estimates that it can bring additional tax revenues of US$150 billion to participating countries each year.

Moreover, the minimum corporate tax can be exchanged for Europe’s cancellation of the previously imposed digital tax on US technology companies, and it can also resolve some trade disputes between the United States and Europe.

Most importantly, the adoption of the minimum corporate tax symbolizes the end of the world's past decades of vicious competition with low taxes, which helps the government to assume the responsibility of redistribution.

Lowest corporate tax can't solve the hollowing out of the U.S. economy

Although the global minimum corporate tax has a very positive meaning and guarantees a certain tax base, it is not a fundamental change to large companies and industries moving from advanced areas with high costs to low-cost areas, because there are still many impacts on corporate profits beyond the tax rate. the elements of.

Ireland and Estonia, which had been opposed before, finally agreed to a minimum corporate tax

When U.S. Treasury Secretary Janet Yellen supported the minimum corporate tax, he said it would protect American workers and make competition fairer.

But I am afraid that in fact, the minimum corporate tax can only hedge part of the negative impact of the Biden administration’s increase in US domestic corporate tax from 21% to 28%.

The tariffs of the Trump era failed to bring back the industry, and most American companies still tend to move out.

The problem of hollowing out is still the biggest problem in the current economy. To protect American workers is much more than the introduction of a minimum corporate tax.

Fairness still needs to take care of low-developed countries

On the other hand, although the minimum corporate tax has the benefit of preventing corporate tax avoidance, it will still bring certain negative effects to low-developed countries that have relied on low taxes to attract investment in the past.

For example, countries such as Ireland and Hungary have a lower level of economic development than G20 countries. They are not trying to cause vicious competition with tax rates. However, in the absence of other methods, they can only retreat and use "low taxes" to attract foreign investment. .

When the developed countries promote the lowest corporate tax to maintain their own fairness and justice, they should still take into account the development needs of low-developed countries, and allow low-developed countries to have a window of development so that they will not be completely excluded from development opportunities. Otherwise, it may lead to a phenomenon that "developed countries are fairer than other countries."

Therefore, developed countries should not forget how to balance the interests of countries with different levels of development in order to achieve the so-called "fairness."

Responding to the “lowest global tax rate” cannot be delayed again and again, Hong Kong must maintain a simple tax system in addition to low tax rates. G7 agrees that the minimum corporate tax can only be the beginning of global reforms.