Global minimum tax crucial to strengthen tax base in developing countries

Global minimum tax crucial to strengthen tax base in developing countries

Finance Minister Enoch Godongwana says a global minimum tax is crucial to strengthening the tax base of developing countries and developing a fairer global tax system.

The Minister was addressing a panel discussion on tax on the sidelines of the ongoing G20 Finance Ministers’ and Central Bank Governors’ meeting held in Cape Town on Wednesday.

“Over the past decade or so, much has [been] done to try and achieve a more transparent fair and efficient global tax system. We note the work done by the G20 OECD [Organisation for Economic Co-operation and Development] on base erosion and profit shifting. 

“[This] work needs to be commended as it…has compelled us to think about how to work together towards a fairer and more sustainable tax system that will benefit all countries.

“The introduction of the global minimum tax is an important step towards achieving this goal. We believe it offers all countries, developed and developing economies, the opportunity to strengthen their tax base in cases where multinationals operating in those countries are not taxed sufficiently in other jurisdictions. This will enable better domestic resources mobilisation for all countries,” he explained.

Godongwana noted that although progress has been made, “much still needs to be done in ensuring that international tax reforms are implemented by all countries”.

“Concerns remain about the level of complexity in the global tax system. This is especially true for developing countries where capacity constraints…limit their ability to effectively administer transfer pricing to cite but one example.

“Capacity constraints also limit developing countries from participating in the information sharing which is crucial to unlocking transparency in respect of capital flows, asset allocation and beneficial ownership.”

Furthermore, he added that improvement in international cooperation and access to information are “key to limiting the effect of complex and aggressive tax structuring”.

Godongwana told the gathering that the United Nations also has a role to play in giving developing countries a “voice to express their challenges and concerns”.

“The UN [United Nations] process should never be seen as an alternative or opposing process to that of the G20 nor should it lead to division. Both processes can be beneficial to all countries…as more cooperation and more inputs will ultimately lead to a more sustainable outcome.

“We can all recognise that working together as a diverse group to find common solutions is very challenging. However, we have learnt as a country that embracing diversity results in better solutions,” he said. – SAnews.gov.za

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Wed, 02/26/2025 – 12:11
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