Page 8 - EY-VG_Agustos_2021_v2

Vergide Gündem
English Translation

Transformation on international taxation:
From competition to cooperation

It is observed that “legal corporate tax” rates varies between 9% and 30% when the
“Key Tax Rate Indicators” (https://www.oecd.org/tax/tax-policy/tax-database/tax-
database-update-note.pdf) which was updated by June 2020 of OECD, is examined.
According to such data, corporate tax rates decreased between 2000 and 2020 in
all countries except for one country and this situation has a reflection on average
corporate tax rate as a 9% of decrease. Even though corporate tax in Turkey
decreased to 20% from 30% in 2006 and increased to 22% in 2018-2020 years and
to 25% in 2021 and 23% in 2022.

Why global minimum tax?

The most significant reasons behind the implementation of global minimum tax are
listed below:

➢• Transformation (digitalization) in economies and difficulties in taxing digital
companies,
➢• Tax rate competition of countries,
➢• Aggressive tax policies of multinational companies,
➢• The burden of Covid-19 on governments,
➢• With the approaching the end of the negative interest period, the interest
payments to be created by the debt financing of public expenditures will further
disrupt the budgets

In this environment, countries turned from "tax competition to tax cooperation" and
governments discovered tax in financing public expenditures.

Tax plan of Biden

A significant reform requirement in terms of international taxation rules had
commenced with BEPS actions (“Base erosion and profit shifting”) and important
improvements have been ensured during this process. However, during Trump
period, US Ministry of Treasury had announced that “US has withdrawn from
discussion on taxation of multinational companies and taxation problems of digital
economy” with its public release on June 18, 2020 since “studies towards taxation
of multinational technology companies are against US companies”.

With Biden's election as US President, the US returned to the negotiating table.
President Biden announced a new “Tax Plan” and the principles in this plan
were “reducing incentives for countries to apply very low corporate tax rates by
promoting the adoption of a healthy minimum tax globally”. Subsequently, Biden
announced his proposal before the G7 meeting to “apply a minimum tax of 15% on
the earnings of companies with high profits, but with little or no tax base”. With this
plan, the USA aims to collect approximately 2.5 trillion USD in taxes in the next 15
years and to use this resource to finance critical infrastructure investments.
The US “global minimum corporate tax” exit represents more than 90% of global
GDP on 1 July 2021, following the G-7's support of the OECD's bi-pronged
international tax reform efforts (Pillar I and II). Support came from 130 countries

8 August 2021