Miles Dean comments on the new global minimum corporation tax
Partner and Head of International Tax, Miles Dean, comments on the impacts of the new global minimum corporation tax, in City A.M.
Miles’ comments were published in City A.M., 11 January 2024.
When asked whether this is the end of a race to the bottom, Miles commented: “No. Pillar 2 will have little or no effect on tax rates as corporation tax systems are so complicated and have many freebies (e.g. tax reliefs) for either national champions or to attract companies from other countries and politicians will still be eager to provide these incentives and advantages.
“For tax competition, all countries will want the rules to affect foreign companies and not their own – witness the US suddenly developing cold feet after pushing for the implementation of the minimum tax in 2021. Also, for countries implementing the minimum tax rule, the battle will most likely shift towards designing tax incentives that are more favourably treated under the minimum tax rules such as qualified refundable tax credits – countries are often much better than business at minimising tax when they want.”
Miles further discussed the relationship between the global corporation tax and the UK’s own rate of corporation tax, stating: “Superficially, the UK rate is above the minimum rate, however, with so many giveaways in the UK tax code they may bring the actual rate within the Pillar 2 limits.”
When queried as to whether the tax will have any impact in the UK, due to the jurisdiction’s higher rate of corporation tax, Miles responded: “No. The UK could obtain more tax where a foreign subsidiary pays less than the global minimum. For UK subsidiaries with a tax rate below the global minimum, the UK will charge a top-up tax to get to a tax rate of 15% in the UK.”
Miles further discussed likelihood of the minimum level increasing, commenting: “Pillar 2 is a political animal and whether the minimum level increases is much more dependent on politicians than any economic considerations.”