Global Minimum Taxation: A Strategic Approach for Developing Countries

Abstract

The world has seemingly embraced the altruistic idea of ensuring a minimum level of corporate income taxation worldwide, consolidating a “benefits for all” narrative by which both developed and developing countries apparently gain. However, this altruistic narrative proves to be quite unrealistic for many developing countries. As argued in this article, the perceived benefits of a global minimum corporate income tax in developing countries rest exclusively upon three unconvincing premises. These include the assumption that all corporate income tax incentives provided by developing countries are equally inefficient, the idea that all developing countries can seamlessly transition from corporate income tax competition to alternative forms of tax and non-tax competition, and most notably, the notion that supporting or opposing a global minimum corporate income tax could either boost or diminish tax revenue for developing countries. This article urges a departure from these premises and elaborates upon three strategic recommendations for developing countries, which include: first, viewing a global minimum corporate income tax as a concept divorced from the assumption of revenue gain or loss; second, using the global minimum corporate income tax as an opportunity to reassess their tax and non-tax incentives, encompassing alternative competitive strategies; and third, striving for simplicity and ease of administration in designing and implementing a minimum tax approach. In doing so, developing countries could perhaps find an opportunity to refine their general action plan to attract foreign direct investment (FDI) more effectively while they still try to ride the wave of minimum global corporate income taxation that the world seems to be in.