China urged to act to minimise impact of global minimum tax rules, seen as ‘first step in the Long March’

In July, 130 countries backed plans led by the Organisation for Economic Cooperation and Development to set a minimum corporate tax rate of at least 15 per cent
Liao Tizhong, former director general of the State Administration of Taxation’s International Taxation Department, has urged China to conduct research

Global minimum tax

Bloomberg

Published: 4:30pm, 12 Aug, 2021

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China should conduct targeted research and propose fiscal and taxation plans in response to new global rules to set a minimum corporate tax, according to a former taxation official.

Beijing needs to act to minimise the negative impact on the investment environment of foreign businesses in China and defend the country’s taxation rights and interests, said Liao Tizhong, former director general of the State Administration of Taxation’s International Taxation Department.

China should analyse the economic impact of the policy in advance, be prepared to amend laws, and start building technology infrastructure as early as possible, Liao wrote in an article this week in International Taxation in China, a publication under the State Taxation Administration.

In July, 130 countries backed a plan led by the Organisation for Economic Cooperation and Development to set a minimum corporate tax rate of at least 15 per cent and countries where big firms operate would get the right to tax between 20 per cent to 30 per cent of profits exceeding a 10 per cent margin.

What is the G7’s global minimum tax, and how could it affect China?

The overhaul is aimed at curtailing tax avoidance by making global enterprises, with implementation targeted for 2023.

The 20 per cent is revolutionary and progressive and is “the first step in the Long March,” Liao wrote, adding that the rate could later be raised to 40 per cent and even 50 per cent.

For the international community, it marks “an important step towards fairness in the international tax system” and is likely to lead to progress in politics, economy, law, governance, and technology, he said.

China has a basic corporate tax rate of 25 per cent for most companies, but reductions for sectors like hi-tech and for investment in research and development mean the rate could be lowered to below 15 per cent.

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