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Globally effective?
Aglobal minimum tax rate of 15% was one of the central topics of the June 2021 G7 meeting in Cornwall. It aims to reduce tax competition and profit shifting in all economic sectors. The ultimate goal is to ensure that the global profits of multinational enterprises would be taxed at an effective tax rate. This move would be disadvantageous for some developing countries while for some others it would be beneficial.
Tax incentives
The following are two categories of tax incentives offered by developing countries to foreign investors:
- Tax holidays preferential tax rates investment allowances tax credits and income exemptions which have the effect of reduction or elimination of taxes paid on profits for a set time. These types of incentives actually fuel profit shifting.
- ‘Accelerated depreciation’ on capital assets under domestic tax laws of the country which create timing or temporary differences between financial...
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