The Global Minimum Tax and Special Economic Zones
This policy brief explores the implications of the 15% global minimum tax on special economic zones, offering comprehensive guidance for governments to reform tax incentives and ensure these zones attract high-quality, sustainable investments. It emphasizes the need for a comprehensive approach that includes both fiscal and non-fiscal incentives, considering infrastructure, skilled labour, and regulatory efficiency.
The 15% global minimum tax (GMT) is designed to discourage the worst forms of tax competition between nations, which can be especially harmful for developing countries where governments are under intense financial pressure. It will also prompt many countries to examine and reform special economic zones (SEZs), which commonly contain tax incentives that could reduce tax rates below the new global minimum of 15%.
The onset of the GMT, officially known as the global anti-base erosion model rules (Pillar Two), presents an opportunity for policy-makers to advance impactful reforms related to tax incentives as well as non-fiscal incentives such as infrastructure, skilled labour, and administration to improve outcomes related to SEZs.
This policy brief offers guidance for governments seeking to take a holistic approach to ensure SEZs and related tax incentives attract high-quality investments and support sustainable investment and inclusive economic growth amid a transforming international tax system.
The brief includes several recommendations for countries seeking to reform tax incentives in SEZs and advises that officials consider the following:
- Have incentives been effective at attracting investment in SEZs?
- How much revenue is forgone from incentives and the cost of administration?
- How will international tax standards impact the use of incentives in SEZs?
Participating experts
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