(Bloomberg) – The preferential tax policies China offers to some multinational corporations could be jeopardized by new global minimum corporate tax regulations, according to a Treasury Department legal adviser.
The tax plan will have an overall “positive impact” on China by improving the sustainability of tax revenues and providing a fair international business environment, said Shi Zhengwen, vice president of the China Association for Fiscal and Tax Law. However, China will have to adjust some of its tax policies to comply with the rules, he said.
“The signing of this agreement poses certain challenges for China’s high-tech companies,” he said. “But tax incentives for companies investing in property, plant and equipment should remain intact while some digital economy companies may face challenges.”
Shi is not directly involved in policy making and spoke in his personal capacity.
On Thursday, 130 countries supported a plan led by the Organization for Economic Co-operation and Development to set a minimum corporate tax rate of at least 15% and to introduce a new regime to apportion the taxes levied on the profits of multinational corporations.
China has a base corporate tax rate of 25% for most businesses, but discounts for high-tech sectors and for investment in research and development mean effective rates can drop below 15%.
“The tax breaks granted by China to some multinational corporations could be lifted, which is conducive to increasing tax revenues,” Shi said. “But I don’t think removing tax incentives is likely to trigger an exodus of multinationals from China as the rest of the world will follow the same rule.”
Contact Editor Michael Bellart ([email protected])
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