Global Minimum Corporate Tax: A Solution for Tax Competition?

The global economy has been shaped by various tax policies and practices over the years. However, one of the issues that has come to the agenda in recent years and caused great controversy is the implementation of the global minimum corporate tax. In particular, this practice, which emerged with the initiative of the leaders of rich economies, stands out as a solution against the tendency of multinational companies to evade taxes and take advantage low tax rates.

If the corporate tax burden paid by multinational companies in the countries where they operate is less than 15 per cent, countries that enact the minimum corporate tax will be able to claim the tax difference that the relevant country does not charge. In particular, developing countries, known as tax havens, offer low tax rates and exemptions to reduce the tax payments of multinational companies. This leads to a decrease in tax revenues and tax injustice.

The global minimum corporate tax scheme aims to reverse this trend. In particular, in an agreement in 2021, the G-7 countries, the major players in the world economy, agreed to implement a global minimum corporate income tax of 15 per cent. This agreement is considered as an important step to ensure tax fairness worldwide and to prevent tax evasion.

Türkiye's inclusion in this practice is important for the economic interests of the country. In particular, preventing escape to tax haven countries and eliminating tax injustice may contribute positively to Türkiye's economic growth. Moreover, with the implementation of a global minimum corporate tax, tax competition may be reduced, and tax payments of enterprises may be regulated in a fair manner.

However, it should not be forgotten that the global minimum corporate tax also has some negative aspects for Türkiye. This practice, which aims to ensure tax fairness, may also adversely affect Türkiye's potential to attract foreign investments and reduce its competitive advantage. Since it will also limit Türkiye's ability to determine its tax policies flexibly, this practice, which aims to ensure tax fairness, should also be adapted to support Türkiye's competitiveness and economic growth at the same time.

Autor: Müge Şengönül