Monday, March 28, 2022
Afton Titus (Cape Town; Google Scholar) presents Global Minimum Corporate Tax: A Death Knell for African Country Tax Policies? at Brooklyn today as part of its Colloquium on International Economic Law hosted by Steven Dean and Julian Arato:
The idea that a global minimum corporate income tax rate should be introduced has been publicized with great fanfare. Not as widely publicized is the fact that this, along with the other provisions of Pillar Two, has negative implications for the corporate income tax policies currently implemented in African countries. Moreover, Pillar Two may also affect the implementation of the United Nations’ Sustainable Development Goals in Africa. In setting out these implications, this paper argues that a more nuanced approach to global harmful tax competition should be followed in the practice of inter-nation equity. This approach is as follows: all countries should cooperate to stop virtual tax competition. Moreover, all developed countries should cease both virtual and real tax competition while developing countries continue to engage in real tax competition – provided that their tax incentives meet certain criteria. Should a developing country not adhere to such criteria, the exemption for that country would fall away. This paper further argues that African countries are already demonstrating that the fears that such an approach elicits are unfounded. The time is opportune for African countries to push for meaningful reform in tax that would result in fairer outcomes for all developing countries.
[T]he implementation of the current Pillar Two would amount to developing countries solely and unjustly bearing the cost of the proposed reforms to the international tax system. In so doing, developing countries would effectively be saving developed nations from the consequences of such nations’ erstwhile decision to address double tax avoidance while allowing tax competition to continue unabated. 100 Such an outcome could not meet any definition of fairness.
There is still time to avoid such an outcome. Proposals such as that proposed in this paper is but one way that this could be achieved. There is a growing movement towards ensuring more fairness in the international tax system fueled by the sense that the tide is turning in favour of developing countries. Developed countries need the buy-in of developing countries to curb the losses they are suffering to their tax base. Coupled with this, MNEs need the large markets that reside in developing countries. There has never been a more opportune time for developing countries to band together and collectively push for meaningful reform of the international tax system. Rwanda is but one example of the tangible costs that developing countries would bear if they do not.