Note: Will Global Minimum Tax Be Implemented Early?
G7 finance ministers agreed to set a global minimum tax rate of at least 15%. The proposal has support from 130 countries, covering almost all nations in the OECD Inclusive Framework, and was signed by G20 finance ministers and central bank governors. Countries need to develop methods to implement this complex system, including international tax reallocation. New standards and mechanisms must be established before governments and legislators adopt domestic laws. Examples include the "Common Reporting Standard" and the "Action Plan on Base Erosion and Profit Shifting"; implementation of such plans takes years. Effective implementation by 2023 is an ambitious goal; more details will be announced at the October G20 meeting.
The 15% minimum tax rate aims to reduce the incentive for companies to establish subsidiaries in tax havens, but questions remain regarding the base tax rate, calculation methods, the size of affected companies, and interaction with other international tax rules. The proposal requires companies to pay at least 15% tax in the country where they operate; if the overseas tax rate is lower, the headquarters country can make up the difference. This targets multinational corporations, aiming to eliminate tax competition between countries.
After the G7 agreement was announced, Hong Kong Financial Secretary Paul Chan Mo-po stated that the global tax regime might affect government tax incentives for various industries. Hong Kong's budget this year emphasizes maintaining a simple, certain, fair, and low-compliance burden tax system. Singapore holds a similar view.
