An endeavor by Group of Seven nations to set minimum global tax rates for big companies presents a rare opportunity to satisfy objectives of both the U.S. and China. Still, Beijing’s support for the proposal isn’t a foregone conclusion.
The proposals are expected to be on the agenda next month at a ministerial meeting of the Group of 20, a consensus-driven organization which includes China. Under the proposals, nations would agree to adjust their regulations to tax the biggest companies based on where they operate and set new thresholds, including a 15% minimum tax rate.
The deal would appear to have few direct implications for the tax system in China, which already imposes rates above thresholds proposed and has stepped up enforcement of tax rules at home. Changes in global tax policy could have a bigger effect in Hong Kong, a financial center that boasts low tax rates, as well as the gambling enclave Macau—both Chinese territories.
The agreement, promoted by the Biden administration, comes as Beijing has its own list of priorities with Washington, starting with removing trade tariffs that were imposed during Donald Trump’s presidency. But while Beijing could use the opportunity to seek a U.S. concession in return for its support, China has historically backed international tax initiatives and may be unlikely to block a measure that already has the support of other big economies.
The G-7 tax proposal would pack more punch if it were to win broad-based support in the G-20, where China is a strong voice along with Russia, India and Brazil.
