How the Global Minimum Tax Is Yet Another Door for Discrimination
Late last year the USA, EU, and OECD convinced 136 countries (except Nigeria, Kenya, Pakistan, and Sri Lanka) to agree to implement a 15% Global Minimum Tax. In a world where countries are encouraged to improve their statistical infrastructure in order to support evidence-based policymaking, there appears to be no empirical research done to justify the introduction of this global minimum tax in the first place, nor what the appropriate tax rate and applicability threshold should be. It appears that simply the universal desire for more fiscal revenue and the negotiation process itself have given rise to an arguably arbitrary 15% tax on multinational corporations with revenue over EUR750 million, which is expected to earn USD150 billion in additional global tax revenues annually, according to the OECD. But who will earn this revenue?
In addition to the fact that this first-of-its-kind global tax policy is devoid of any empirical justification, it also excluded poor countries. Tax Justice Network (TJN) criticized this deal for its inequity and exclusivity, stating “it will neither curb profit shifting effectively, nor provide substantial revenues to more than a handful of OECD member countries. Everyone else has been left out — especially lower-income countries.” Maybe because poor countries are not really the problem?
The countries pushing this deal themselves are responsible for two-thirds of the world’s corporate tax abuse, according to TJN, and the OECD itself “failed to detect and prevent corporate tax abuse enabled by the OECD’s own member countries — and in some cases, pushed countries to rollback their tax transparency.” Can the OECD be trusted to police this tax effectively and equitably? Will OECD nations’ effective tax rates match the nominal minimum 15%, or will their incentives and concessions lower the tax burden to improve their competitiveness? Oxfam suggests the latter, “Calling this deal ‘historic’ is hypocritical and does not hold up to even the most minor scrutiny…including a complex web of exemptions that could let big offenders like Amazon off the hook.” Furthermore, the OECD’s own research found that “Countries with a lower corporate income tax are likely to grow faster and attract more investment and jobs than high-tax countries.” What manner of institution goes through the trouble of conducting empirical research, just to ignore it?
Already the USA’s Foreign Account Tax Compliance Act (FATCA) has had to undergo scrutiny for its unintended consequences, and so too the Financial Action Task Force. The fact that the likely unintended consequences of this Global Minimum Tax are not even contemplated, is yet another elementary mistake. There is no reason to believe that the OECD, which is already deficient in policing existing tax standards, can produce a better outcome with this deal. Perhaps proper policing was never the intention. We have seen this movie before. Since the beginning of time, the powerful have created structures to maintain and solidify their position, not weaken it. And institutionalized discrimination and systematic marginalization of weaker states continues unabated. The effects of such treatment only radicalizes and drives disaffected states towards other pariahs, and their most vulnerable towards the powerful nations. For there is no ‘New World’ left for the marginalized masses to flee to, only the ‘First World.’ Eventually, ‘their’ problems become yours.