A Comparison of the Global Minimum Tax in Different Countries

In various regions, countries are gearing up for significant changes in their tax policies as they adapt to the evolving global landscape of corporate taxation. The focus is on implementing the Global Anti-Base Erosion (GloBE) Rules under the Base Erosion and Profit Shifting (BEPS) 2.0 framework, which is led by the Organisation for Economic Co-operation and Development (OECD). The aim is to establish a minimum Corporate Income Tax (CIT) rate of 15% for multinational enterprises (MNEs) globally. This initiative is gaining traction in countries like Vietnam, China, Hong Kong, Italy, and across the European Union.

In Vietnam, the Deputy Director of the General Department of Taxation, Dặng Ngọc Minh, stresses the importance of adopting the global minimum CIT by early next year. This is in line with key foreign direct investment (FDI) contributors like Singapore, Japan, and South Korea, who plan to enforce the OECD's initiative from 2024. The global minimum tax, though not mandatory, is crucial for countries using tax incentives, like Vietnam, to attract MNEs. The country currently has a standard corporate tax rate of 20%, but due to incentives, the effective rate for MNEs often falls below 15%. Vietnam plans to integrate the global minimum tax into its tax system to ensure it can collect additional taxes from MNEs paying less than 15%.

China, operating within the BEPS 2.0 framework, confronts implications due to its standard CIT rate standing at 25%, surpassing the 15% minimum rate. However, specific industries and regions offering tax incentives could result in effective rates falling below 15%, prompting the need for additional top-up taxes. Sizeable Chinese Multinational Enterprises (MNEs) incorporated in low-tax jurisdictions may also find themselves subject to these supplementary taxes. Similarly, in Hong Kong, where the standard CIT rate is 16.5%, the prevalence of tax incentives leads to many companies effectively paying below 15%. Both mainland China and Hong Kong are compelled to modify local regulations to adhere to the Global Anti-Base Erosion (GloBE) Rules.

In Italy, the global tax is seen as a significant fiscal policy. The Italian Ministry of Economy and Finance plans to implement the EU directive by 2024. Applicable to companies with revenues over 750 million euros, it involves a minimum flat tax rate of 15% on turnover. Italy aims to harmonize tax practices and discourage strategic business relocations to low-tax jurisdictions. The global tax is calculated by subtracting the percentage of profits already taxed. Italy is also considering reshoring incentives, hoping to generate about 3 billion euros in revenue.

The advantages of the global tax include increased state revenues, estimated at 40 billion euros for the EU and 220 billion dollars for OECD countries annually. It aims to level the playing field among advanced economies, potentially leading to a new global economic order. However, challenges and controversies arise, such as the complexity of tax application and potential negative impacts on certain economies reliant on tax incentives.

Countries like the UK, France, Germany, and Italy might secure their fiscal positions using tools like research and development credits, while others may need to shift their competitive focus. The success of the global tax will depend on its execution and countries' ability to adapt to this new fiscal landscape.

In summary, the global tax is ushering in a unified approach to corporate taxation, aiming to increase state revenues and reduce unfair competition. However, its implementation brings complexities and potential disadvantages for certain economies, making its success contingent on effective execution and global adaptation.

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