Tax case study on BEPS $($base erosion and profit sharing$).$ The following information provided below is our proposed course of action on how we should expect the global minimum tax rate to increase and the rebuttal on the imapct it will have on countries with lower tax rates. Can you provide a detailed counter argument on how BEPS should help these countries?

Proposed course of action:

The GMT is a strategic implementation in achieving the OECD$$s objective of attaining a tax revenue of US $150$ billion dollars annually. However, we would recommend modifications of the GMT to be made in the future, with a key consideration of the enhancement of its current rate at $15\%.$

There are two main factors for this consideration. Primarily, its current tax revenue goal is still insufficient in recovering the entire loss the government suffers internationally from BEPS practices. It has been reported that BEPS practices can cost the government up to US $240$ billion in tax revenue $($OECD$,2023).$ Assuming that the OECD$$s two package policy can be executed flawlessly, the overall recovered loss in tax revenue is still only at $62\mathrm{.}5\%.$ Additionally, the Tax Foundation $(2023)$ states that the worldwide average statutory corporate income tax rate across $181$ jurisdictions, when weighted by GDP is at $25\mathrm{.}67\%.$ In comparison with the GMT$,$ we contend that the government would not be satisfied as these MNCs will still be charged below the statutory rate of most nations. This can be further illustrated by the Biden Administration$$s intensive support to set the GMT to $21\%$ instead of $15\%$ prior to the implementation of the GMT$.$ Although the Biden Administration has adopted a more lenient approach by accepting the GMT to be $15\%,$ they have still advocated their interest to increase the GMT $($KPMG$,$ n$.$d$.).$ Hence, as BEPS $2\mathrm{.}0$ is in its early stages and that the OECD is still actively seeking to improve the program. We would anticipate and recommend that the GMT to continue to increase towards the average global statutory rates in the future.

Nonetheless, we acknowledge that the increase in GMT will create a larger disparity between countries with lower and higher tax rates. The GMT will put pressure on countries that have corporate rates that fall below it$.$ These nations will forfeit their competitive edge in attracting foreign investments from these MNCs$,$ as they would no longer be seen as $$tax havens$.$ Janeba & Schjelderup $(2023)$ explains that as MNCs no longer have the incentive to profit shift, $$non$-$havens$$ have higher value in attracting foreign indirect investments. In contrast, this revenue gain is offset from the losses that $$tax$-$havens$$ would incur due to reduced profit shifting. Cantos $(2022)$ further exemplifies that although the estimates of the potential impact of BEPS on revenue in different countries is still scarce, he affirms that if tax havens do not adjust their taxation in response to the GMT$,$ more countries will lose out in attracting foreign investments. Henceforth, despite an overall increase in tax revenue, countries with lower corporate tax rates might potentially suffer greater losses.