China has ‘ample room’ to absorb global minimum tax, but still ‘prickly’ on issues of economic sovereignty
- China is among 130 nations that have expressed support for a minimum global tax rate of at least 15 per cent, according to the OECD
- China is a magnet for global investors due to its huge market and established supply chain, rather than tax breaks it offers multinationals, experts say
China’s decision to back a global overhaul of cross-border taxation aimed at preventing a race to the bottom on tax rates and halting multinational tax evasion is likely to hinge on diplomatic calculations as much as economic concerns, according to experts.
The agreement will go to the Group of 20 major economies for endorsement at a meeting in Venice this week.
While implementation could be years off, analysts attributed Beijing’s tacit approval of the deal to a desire to maintain good ties with the developed Western world, continue to play a role in global leadership, and because the new tax regime would not be too burdensome on its economy.
China’s corporate tax rate is technically 25 per cent, but is lowered to 15 per cent for qualified hi-tech companies, and the nation is already a magnet for global investors due to its huge market and established supply chain. Chinese multinationals also have a far smaller overseas presence than their Western peers.
“I think it is acceptable because our preferential tax rate is often already set at 15 per cent,” said Cai Chang, a tax professor at Central University of Finance and Economics in Beijing.
