We have submitted comments to the public consultation on the Implementation Framework for the Global Minimum Tax.

The agreement on measures to end international tax competition is a historic feat of international cooperation. However, its main component, the global anti-base erosion tax (the GloBE) has serious flaws. Implementation must respect states’ tax sovereignty, and each country must decide after a full democratic debate whether to adopt the GloBE, and if so how to incorporate its rules into national law. In our view most low-income countries will not implement the GloBE itself, partly due to its complexity, but above all because of the bias in its rules in favour of the home countries of multinational enterprises (MNEs). This gives lowest priority to taxation of profits at source, where they arise, by MNE host countries, disadvantaging low-income countries which generally are only hosts to MNEs.

Nevertheless, adoption of the GloBE could benefit all countries, provided that it is not implemented in a way that reinforces this unfair bias. Ensuring that all profits will be taxed at least at the minimum rate should enable and encourage all countries to end unsuitable tax incentives to MNEs and adopt appropriate measures to strengthen source taxation. These measures should not be limited to those provided in the GloBE itself. For those participating in the scheme, they need only be compatible with the GloBE outcomes, while those not participating should be allowed and encouraged to adopt any measures they consider suitable, particularly to prevent the shifting of profits out of countries that are hosts to MNEs. The aims of the GloBE should be clearly stated as enabling MNEs to be taxed where they have real economic activities, and ending the secular decline of corporate taxation that damages all countries in the long run.