China is not ready to accept introduction of minimal tax rate on profit of corporations which is lobbied by the countries of “Big Seven”, writes Bloomberg referring to the sources familiar with negotiations on this issue.
China is not among the G7 countries that have agreed to establish a minimum level of taxation, but it is part of the so-called G20. Ministers from this group of states are due to meet in Venice next month, and they are also expected to reach preliminary agreements on the tax issue.
Beijing’s stance remains a major obstacle to the success of these talks, according to a Bloomberg source familiar with the discussions. The country will demand exceptions that will prevent it from reaching an effective rate of 15 percent.
Most companies in China pay a 25 percent tax, but certain exemptions for the high-tech sector suggest a rate below 15 percent. Beijing wants to keep these exemptions, which it considers key to the country’s economic development. Right now, some of the high-tech companies are giving up much less than 15 percent, and China “may offer exemptions for these sectors,” said Wang Zecai of the China Tax Academy, a research institution affiliated with the country’s finance ministry.
Beijing considers the high-tech sector of the economy important to its development plans for the next five years and is trying to maintain growth rates despite the restrictions the U.S. is trying to impose.
Hungarian Prime Minister Viktor Orban has already announced his disagreement with the G7 initiative. He thinks that plans to introduce minimal corporate tax are absurd and will lead to reduction of investments in EU countries.
Agreements on reform of taxation of big corporations were reached by representatives of “Big Seven” at the beginning of June. In addition to the introduction of a minimum rate of 15 percent of profits, the initiative suggests that companies will be obliged to contribute to the budget of the countries where they sell.