Zhou Xiaochuan: Fiscal and taxation issues must be mentioned on the international agenda, and the distribution mechanism of various countries is an important issue in the future

Reporter | Liu Chenguang Edit |

"From the past point of view, fiscal and taxation issues are all domestic problems of various countries, and it is rarely possible to study and discuss in depth and reach common action at the international level. But with globalization, especially the development of the digital economy, this issue must be put on the international agenda. On December 4, at the 18th Annual Global Conference of the International Financial Forum (IFF), Zhou Xiaochuan, former governor of the central bank, said about the new situation of global tax policy.

In July 2021, the G20 Finance Ministers and Central Bank Governors Meeting reached a historic agreement in Italy on a more stable and fair international tax framework. This reform will reshape the current international tax rules that have been in operation for nearly a century, and will have a huge impact on the global layout and investment operations of multinational enterprises.

On October 8, the Organisation for Economic Co-operation and Development (OECD) announced that 136 countries and jurisdictions have agreed to reform the international tax system, imposing at least 15% corporate tax on large multinationals from 2023 onwards. G20 finance ministers and central bank governors expressed support for global corporate tax reform at a mid-October meeting.

Zhou Xiaochuan believes that reaching an agreement is only the beginning, and it is still a long way to go to be truly implemented, and it requires a lot of research, discussion, and coordination to be able to implement it. "Enterprise profit margins of more than 10% should be shared with the market, 10% of profits refer to what profits, can it be strictly calculated? In this case, if a part of the tax revenue should be shared with the so-called consumer countries or market countries, the final agreed leverage is 25%, and 25% of the corporate income tax is to be shared. ”

Zhou Xiaochuan frankly said that taxation still needs theoretical analysis, and if the theoretical basis is not sufficient, the reason is not easy to explain clearly, it is difficult to coordinate, and there will be a lot of bargaining.

In Zhou Xiaochuan's view, paying taxes and taxation is still a game. The newly determined content has not yet undergone a game, nor has it been simulated by a game, and it is necessary to simulate what this game is like. So it's not easy to underestimate the tax avoidance of the parties involved in paying taxes," "After observing so many years, global multinational companies, all kinds of companies, and some governments of 'tax haven countries' are very smart and have thought of many ways." ”

"There is a lot of common international content, and in the past few years everyone has been saying that the International Accounting Standards should be slowly converged, and different contents should be integrated into one, but it has not yet been done." There are many problems in measuring corporate profits and many financial indicators, which rely on accounting standards and auditing, and whether there is a consistent understanding, as well as credible international audits. Zhou Xiaochuan stressed.

Zhou Xiaochuan believes that the generation of this protocol cannot ignore the important background. "The digital economy is one of the backgrounds, in fact, the main background is because some major developed countries have insufficient fiscal revenues and spending is increasing, which is the global crisis that makes spending increase." On the one hand, the global COVID-19 pandemic has increased spending, and many countries are financially stretched, so they are also eager to get fiscal revenues up. Although most of the rhetoric is about fair competition and fair taxation, in fact, insufficient taxation and deficit problems are also important aspects that need to be considered. ”

Zhou Xiaochuan pointed out that in the face of the global crisis, the G20 has studied two directions, on the one hand, to find ways to consolidate taxes, so as to cover the needs of overcoming the financial crisis; on the other hand, large financial institutions cannot be large and cannot fall, so they must strengthen their own capital and engage in systemically important financial institutions and systemically important banks. "Looking back at history, whether the tax rate should be higher or lower, whether the tax base should be a little wider or a little narrower, it is also like a pendulum, it will swing to the left, to a certain extent to the right, and then walk back." Zhou Xiaochuan said.

Zhou Xiaochuan believes that the OECD itself has played a good role in promoting. "OECD is still relatively good at finance and taxation, really in terms of finance and taxation, OECD still did a lot of research, it should be said that there is no global fiscal and tax coordination agency, OECD has played a role in this regard."

However, to a certain extent, it will also form a blow to multinational companies. "After a series of moves, the voice of multinational companies has become weaker."

"This competition for the minimum income tax rate has come to an end, with a minimum corporate income tax rate of 15%, on the one hand, it has the effect of promoting fair competition, but anything may have side effects," Zhou Xiaochuan stressed that the OECD should stand a little higher, not only should consider fiscal and tax issues, consider the balance of domestic budgets in developed countries, and even consider the need to rescue the crisis and the epidemic, but also consider the relationship with other important economic phenomena, especially the relationship with globalization.

For multinational companies, Zhou Xiaochuan believes that in general, multinational companies are also an important cornerstone of globalization, and without so many multinational companies, there would be no globalization today.

"Of course, multinational companies will also do a lot of taxation, avoid a lot of taxes, and cause some distortions, on the one hand, they should be corrected; but we must also prevent protectionist sentiments, pure nationalist sentiments take advantage of this, and when doing these policy discussions, they actually tilt toward protectionism and nationalism."

How can research be stepped up to improve global tax revenue? Zhou Xiaochuan summarized several reasonable aspects of the OECD: "First, it is necessary to tax at the place where economic activities occur, that is to say, to set up subsidiaries as independent taxpayers in the places where economic activities occur as much as possible. ”

Third, it is necessary to study advertising revenue in a broad sense, and what exactly is the way it is earned. "This is a very obvious change brought about by the digital economy, and it is also said that a lot of the income tax sharing content is advertising revenue, which still needs to be done a lot of research."

In addition, Zhou Xiaochuan stressed that the distribution of tax revenue among countries will be a difficult problem in the future, because all countries will fight for their own interests. Exploring what kind of distribution mechanism is an important issue that needs to be faced in the future.

"If we emphasize global fair competition, whether it is from trade and investment, or from taxation, or from many aspects are important, but don't imagine that the tax aspect encourages fairness, things are solved, in fact, the more important aspect is how different countries, multinational companies, digital platform companies compete for market share, and have adopted various different means in price competition, which must be solved." Zhou Xiaochuan added.