Saudi Press

Saudi Arabia and the world
Friday, Apr 26, 2024

Hong Kong faces ‘restraint’ under global tax rules as China urged to agree

Hong Kong faces ‘restraint’ under global tax rules as China urged to agree

Few obstacles stand in the way of China accepting a global minimum tax rate, analysts say, but the new rules could impact Hong Kong as a leading international tax haven.

China has been urged to join a push by the United States for a global minimum tax rate, with experts saying it is an opportunity for Beijing to participate in international economic governance and create a common ground with Washington as high-level trade talks resume between the world’s two biggest economies.

The corporate tax floor of 15 per cent, agreed in a landmark accord by Group of Seven (G7) finance ministers at the weekend, could form the basis of a worldwide deal that US Treasury Secretary Janet Yellen said would halt a “race to the bottom on corporate taxes”.

There will be little harm in China accepting the tax regime because the country is already a magnet for global investors, analysts said, though Hong Kong could be affected.

“China will probably accept it, because the country no longer counts on preferential tax to attract investors and our actual rate is much higher,” said Ding Yifan, a senior researcher with the Development Research Centre of the State Council, a government think tank.

China has a nominal corporate tax rate of 25 per cent and grants a 15 per cent rate for qualified hi-tech companies.

While the cancellation of some local tax preferences has contributed to the relocation of foreign manufacturers in recent years, authorities have boosted efforts to open market access and improve the business environment to keep them onshore.

Ding, however, expected more negotiations with the US on the matter as the two countries resume economic dialogue.

“China can put its new demands on the table,” he said.

Last week, Yellen had a “candid” virtual meeting with vice-premier Liu He on a variety of macroeconomic issues.

Yellen, who proposed the global minimum tax in April, called the G7 decision on Saturday “a significant, unprecedented commitment” to level the playing field for businesses and encourage countries to compete on positive bases.

Andrew Choy, international tax and transaction services leader at EY Greater China, said the proposed tax arrangements would impact Hong Kong more than the mainland.

In Hong Kong the de facto tax rate is often lower than the statutory 16.5 per cent, whereas most foreign firms pay more for their mainland subsidiaries.

“It won’t reduce China’s competitiveness, nor force investors to relocate,” he said, adding Beijing should grasp the opportunity to make its voice heard.

Speaking in Hong Kong’s legislature Monday, Financial Secretary Paul Chan said the proposed changes to the global tax regime might affect some of the tax concessions the government offers to various industries.

“We would like to use low tax rates to promote development for certain sectors so we may be restrained by using a low tax rate regime as a competitive method,” Chan said in response to a lawmaker’s question.

A global tax minimum is likely to be discussed further by the Organisation for Economic Cooperation and Development (OECD) and the Group of 20 later this year. China’s finance ministry has not yet commented on the G7 agreement.

Cao Hongyu, a researcher with the Bank of China, one of the nation’s “big four” state-owned banks, said there were few internal obstacles for the government to implement the global minimum tax rate.

International negotiations would provide a chance for China to participate in and lead global economic governance, he said in a research report last week.

“Pushing forward the talks for a global minimum corporate tax rate can help safeguard China’s tax sovereignty, build a good business environment and protect the interests of Chinese companies that expand globally,” Cao said.

China should try its best to prevent excess limits on multinational companies and speak out for emerging economies, for instance setting preference for the least developed countries, he said.

“It will project China’s image of being a responsible country and help fight against deglobalisation.”

Newsletter

Related Articles

Saudi Press
0:00
0:00
Close
Reports in Gaza: 5 dead from the impact of aid packages dropped by the USA
Apple warns against drying iPhones with rice
China Criticizes US for Vetoing UN Ceasefire Resolution in Gaza
In a recent High Court hearing, the U.S. argued that Julian Assange endangered lives by releasing classified information.
The U.S. vetoed a U.N. Security Council resolution calling for a temporary ceasefire in Gaza, instead proposing its own six-week ceasefire plan contingent upon the release of all hostages held by Hamas
Prince William Urges End to Gaza Conflict
Saudi Arabia ranks first in UN index for e-government services in MENA
Israel has gone ‘beyond self-defence’ in Gaza, says Labour’s Streeting
EU Calls for Immediate Ceasefire in Gaza Conflict
Israel Records 20% Drop In GDP, War In Gaza Is The Reason
Saudi Arabia's FDI Inflows Grow with New International Standards
Venture Capitals Power Up Across MENA Region
Saudi Arabia Introduces Terms for 30-Year Income Tax Exemption for Multinational Companies
Saudi FM: Establishing Palestinian state is only pathway for Mideast stability
Russian opposition leader Alexey Navalny has died at the Arctic prison colony
Elon Musk's Starlink Gets License For Israel, Parts Of Gaza
Influencers Exploit X Platform for Profit Amidst Israel-Gaza Conflict
PM Modi Announces Opening Of New CBSE Office In Dubai
International Criminal Court's Chief "Deeply Concerned" By Rafah Bombing
January Funding for MENA Startups Totals $86.5 Million
Saudi Arabia accelerates digital economy growth through Nvidia partnership
Indian female military officers commend Saudi Arabia's progress and women's empowerment
Israel unveils tunnels underneath Gaza City headquarters of UN agency for Palestinian refugees
Israel deploys new military AI in Gaza war
Egypt threatens to suspend key peace treaty if Israel pushes into Gaza border town, officials say
Israel Utilizes AI Military Technology in Gaza Conflict
Saudi Arabia Warns Of A "Humanitarian Catastrophe" If Israel Moves On Rafah
China Warns Iran to Halt Houthi Attacks or Damage Trade Ties
US University To Shut Qatar Campus Due To "Heightened Mideast Instability"
Iran-backed hackers interrupt UAE TV streaming services with deepfake news
Facebook and Instagram Ban Iran's Supreme Leader
Finnish Airline, Finnair, is voluntarily weighing passengers to better estimate flight cargo weight
U.S. Secretary of State Blinken: The Israelis underwent dehumanization on 7.10, this does not give them the right to do this to others.
Defense Technology Showcase Held in Riyadh
Saudi Arabia’s non-oil exports rise 2.5% to $6bn in November 2023: GASTAT
UK Bans Misleading "Zero Emissions" Claims for Electric Cars
Gaza's Teen Inventor Sparks Light in Displacement
Netanyahu Rejects Ceasefire Proposal, Insists On Total Victory Over Hamas
Guterres appoints independent UNRWA review panel
Private Sector Employment Hits Record High with Over 11 Million Employees in January
Rolls-Royce Executive Encourages Saudi Women to Tap into Their Inner 'Superhero' for Success in Defense Industry
Saudi Arabia launches National Academy of Vehicles and Cars
Saudi Tourism Minister Reveals Plan for 250,000 New Hotel Rooms by 2030
SAR to more than double eastern network passenger capacity with new trains deal
Saudi Arabia Enhances National Defense with New Partnerships
Saudi Aramco Maintains Arab Light Crude Pricing to Asia for March
NEOM Establishes New York Office to Support Investors
Saudi Wealth Fund Draws in Over $25 Billion Worth of Investments in Three Years, Al-Rumayyan Reveals
ZATCA Cautions Against Scammer Schemes
INTRA Defense Technologies inaugurates drone factory in Riyadh
×