This has created a conducive environment for enterprises with foreign direct investment outside the country to operate. The global minimum tax (GMT) policy is designed to address tax avoidance and competition among multinational corporations. Its aim is to ensure that all countries receive a fair portion of these organizations’ profits worldwide.

1. In brief of Vietnam’s tax market

a. Overview

The objective of GMT is to establish a global standard for corporate income tax by implementing an international agreement. Its primary aim is to combat profit shifting and tax base erosion by multinational companies. The agreement proposes a minimum global effective tax rate of 15%, and it is projected to take effect in 2024.

b. Category:

The policy consists of two pillars:

+ Pillar 1:
Allows the countries where the revenue of multinational corporations is made to tax a portion of the profits of these companies, even if they do not have a physical presence there. This pillar mainly targets digital companies with large market share and high profitability.

+ Pillar 2:
Set a GMT tax rate of 15% for multinational corporations, based on their business results. If a company pays less than 15% tax in a certain country, the company’s home country can raise its taxes to a minimum, eliminating the incentive to shift profits to jurisdictions. low tax.

c. Advantage of GMT
Governments anticipate that the policy will generate billions of dollars in revenue. These funds can be utilized to finance public services or reduce debt. The implementation of GMT aims to curb tax avoidance and evasion by multinational corporations, thereby establishing a level playing field for businesses and enhanced fairness for taxpayers. According to the OECD, they estimate that GMT will generate an additional $150 billion in annual tax revenue. They expect the policy to go into effect in 2024, after enacting necessary domestic legislation and signing a multilateral agreement among participating countries. Many nations have acclaimed the GMT policy as a significant accomplishment that will foster a more equitable and stable international tax system.

2. Impact of GMT on SMEs

For SMEs with subsidiary companies or branches in other countries, this policy may necessitate paying more taxes under Pillar 2. Vietnam can impose additional taxes to meet the minimum rate of 15% if the SMEs are paying less tax compared to any other country. This might reduce the motivation to invest or expand in low-tax jurisdictions.

3. Impact on Vietnam

Experts predict that the implementation of the Global Minimum Tax (GMT) policy will profoundly affect foreign direct investment (FDI) inflows, especially as developing nations heavily rely on tax incentives to attract such investments. They anticipate that the GMT policy could potentially reduce FDI inflows to low-tax countries by around 20% while simultaneously increasing FDI outflows from high-tax countries by up to 10%.

4. Conclusion

In conclusion, the implementation of a GMT represents a significant step towards achieving a fairer and more equitable international tax system. By ensuring that multinational corporations pay their fair share of taxes regardless of where they operate, this measure aims to eliminate tax evasion and address the issue of profit shifting. Moreover, a GMT can help countries generate more revenue to invest in vital public services, infrastructure development, and social welfare programs. Ultimately, it is an essential tool in fostering global economic cooperation and creating a more just and sustainable future for all.

For the full detail of this post, please reference on this link: http://hmlf.vn/global-minimum-tax-gmt-towards-a-fairer-international-tax-system/

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