By: ZAYN GHAZIL JABBAR
In an increasingly globalised economy, multinational corporations (MNCs) have mastered the art of shifting profits across borders to minimise their tax liabilities. MNCs are organisations that are incorporated and operate in two or more countries (Encyclopaedia Britannica, 2024). By exploiting loopholes and leveraging tax havens, many MNCs legally avoid billions of dollars in taxes each year—funds that some believe could otherwise support public services and infrastructure. This has sparked a growing global debate about the fairness and sustainability of the international tax system. At the heart of this debate lies the proposal for a global minimum tax. According to the Organisation for Economic Co-operation and Development (OECD), a global minimum tax is a mechanism that “ensures that large multinational enterprises pay a minimum level of tax on their income in each jurisdiction where they operate, thereby reducing the incentive for profit shifting to deter large multinationals from evading taxes while ensuring they generate some revenue through profit shifting” (OECD, 2024). Advocates argue that a global minimum tax would promote tax fairness and reduce global inequality, while critics feel it may hinder investment and strain international relations. This essay explores whether MNCs should be forced to pay a global minimum tax, analysing the issue through a social, political, and economic lens to weigh the potential benefits against the practical and ethical challenges it poses.
Supporters of forcing the global minimum tax rate believe it prevents tax avoidance. According to the OECD’s 2023 Minimum Tax Implementation Handbook, governments are losing around USD 155-192 billion a year to profit shifting (OECD, 2023). A loss of that magnitude particularly harms low- and middle-income countries, where corporate taxes are key to public revenue (ibid). Nations can avoid this through the introduction of a global minimum tax, as it is a means of preventing tax havens from being used as an opportunity by MNCs to cherry-pick the most lax jurisdictions. If a global minimum tax is implemented, MNCs will be forced to pay the same tax rate across the globe, making tax havens redundant. The OECD, a globally respected intergovernmental organisation comprising 38 member countries, is known for its well-researched and carefully considered policy proposals. While the OECD sets widely accepted global standards, its policy proposals may sometimes reflect the priorities of its high-income member countries, introducing an element of institutional bias that may not fully align with the needs of developing nations. Furthermore, profit shifting is a tool that allows MNCs to avoid paying taxes on profits earned in different countries. To build upon this, the book by the French economist Gabriel Zucman and the French-American economist Emmanuel Saez, The Triumph of Injustice (2019, pp. 110-127), further solidifies how, via tax havens, MNCs lower their taxable income. The book revealed that this allows MNCs to push the effective tax rates of their subsidiaries down to single digits through offshore structures, thereby eroding the tax base and revenues for countries. Their analysis strengthens the case for a global minimum tax by highlighting how international coordination can restore fairness and reduce inequality.
Moreover, reducing global inequality is another argument that can be made for forcing
MNCs to pay a global minimum tax. According to a report published by Oxfam Asia, Association of Southeast Asian Nations (ASEAN) member countries are going through a disproportionate economic slump, largely because there was not enough investment in ‘basic’ public services such as healthcare, learning, social protection, etc. (Oxfam et al.,
2020). In the ASEAN region, levels of revenue collection, measured as a proportion of GDP, remain very low compared with OECD countries at an average of 19.1% (ibid). This means that if a country’s GDP is $100 billion, an OECD country might collect $35 billion in taxes (35% of GDP) and an ASEAN country might collect only $15 billion (15% of GDP). The average ratio across the region was 19.1% of GDP in 2018 (ibid). Lower than half of the total collected on average in the OECD countries and lower than in the Latin America and Caribbean regions (ibid). These low ratios mean that ASEAN member countries have “little budget capacity and are running public deficits, and this gap has dramatic consequences for the quality of public services, infrastructure, and good governance” (ibid). The report calls for ASEAN member states to work together to define clear minimum standards of corporate tax incentives at the regional level, thereby curbing harmful tax practices that eat into public finances and are just plain unnecessary competition amongst member states. A shared minimum tax standard across the region is expected to lead to better revenue being collected in domestic revenue, the report said, which in turn could enhance public service and lower inequality. Oxfam in Asia is a credible source, as it is a British-founded confederation of 21 independent non-governmental organisations. However, its strong advocacy for tax justice may introduce bias, as reports often emphasise corporate tax avoidance harms while downplaying economic downsides like reduced investment. Additionally, as a group focused on advocacy, Oxfam Asia may focus too much on fairness and not enough on how realistic or practical the policy is. Furthermore, French economist Thomas Piketty, in his book Capital in the Twenty-First Century, corroborates this view as he argues that tax competition among nations has weakened progressive taxation, enabling
MNCs to shift profits to low-tax jurisdictions and avoid paying their fair share (2013, pp. 493-514). Progressive taxation is “a tax in which the rate of tax is higher on larger amounts of money” (Cambridge Dictionary, 2025). Piketty’s evidence includes declining corporate tax rates and increasing inequality in developed economies (2013, pp. 493514). Like Saez and Zucman, he emphasises that without a global minimum tax, countries will continue competing in a self-destructive manner that ultimately undermines public welfare.
On the other hand, it can be argued that forcing MNCs to pay a global minimum tax presents administrative and enforcement challenges that would be nearly impossible to overcome, rendering the benefits of such a tax pointless. According to a report by the Asian Development Bank (ADB), many developing Asian economies already struggle with fragmented and resource-constrained tax systems (Hill et al., 2022). The report emphasises that implementing a complex regime like the global minimum tax would overburden already strained tax authorities, who need to monitor cross-border profits and enforce top-up taxes—tasks requiring sophisticated data-sharing infrastructure and trained personnel (ibid). The report argues that low tax morale and weak institutions make these reforms unlikely to succeed without big changes to the overall system. This suggests that the global minimum tax could deepen inequality between developed and developing countries by imposing unrealistic expectations on the latter while only marginally increasing revenues. It helps explain why the implementation of the global minimum tax is more challenging in developing economies, making it an essential source for understanding the equity and feasibility of global tax reform. ADB is a multilateral development finance institution headquartered in Manila and provides economic research, loans, and technical assistance to promote inclusive growth and sustainable development across Asia and the Pacific. Since ADB is based in Manila, they will likely be well-versed with the economies of countries in Asia, making the analysis of the global minimum tax in the context of Asian countries relevant and reliable. This strengthens the validity of the report. Meanwhile, the Australian Taxation Office outlines the intricate mechanisms required for implementing the global minimum tax in Australia, including the Income Inclusion Rule, Undertaxed Profits Rule, and qualified domestic minimum top-up taxes (Office, 2024). This shows that even a developed nation like Australia would face considerable administrative hurdles if MNCs are forced to pay a global minimum tax.
Furthermore, another argument against enforcing a global minimum tax on MNCs is that, on a global scale, it can indirectly affect employment by first stifling innovation. India, a major emerging market, has demonstrated the importance of favourable tax policies in attracting MNC investment. According to a study by the India-based Institute for Economic Growth (IEG), India’s reduction in corporate taxes was linked to increases in both domestic and foreign investments (Sahoo and Bishnoi, 2021, pp. 10–12). The study argues that these investments translated into job creation, technological advancement, and economic growth. The research suggests that implementing a global minimum tax could reverse this trend by making emerging economies less attractive for MNCs, ultimately slowing progress and job creation (ibid). The IEG is a leading research and policy think tank based in New Delhi, India, affiliated with the University of Delhi. It is recognised for conducting in-depth economic and social research, particularly on issues affecting developing economies. Its research is used by both Indian policymakers and international bodies like the World Bank and UNDP, which strengthens its credibility as a neutral and academically rigorous institution. Furthermore, one of the authors, Pravakar Sahoo, is a professor of economics at IEG. His expertise, along with the India-focused nature of both the author and the publication, makes the study particularly relevant when considering the Indian context. Additionally, a global minimum tax reduces the funds available for research and development, which slows down technological progress, according to a report by the American think tank The Tax Foundation (Bunn, 2024). As technological innovation fuels new industries and productivity improvements, its decline can hinder long-term job creation (ibid). The report analyses Puerto Rico, whose tax code initially favoured U.S. MNCs, making it attractive for hosting assets and factories (ibid). However, investment and hiring declined when MNCs became subject to a 35% U.S. corporate tax (ibid). This suggests that a global minimum tax could raise the effective tax burden on MNCs, pushing them to cut costs by downsizing operations and scaling back production, both of which adversely affect employment.
Before this essay, I believed that forcing MNCs to pay a global minimum tax would benefit society because, intuitively, it made sense: force MNCs to pay a standard rate of tax everywhere so that there is no incentive for profit shifting. However, after critically assessing the information I have researched, my stance has changed: I now believe that forcing MNCs to pay a global minimum tax is not an effective policy for governments to implement. The reason behind this change in view is that, in practice, the tax must be supplemented by world cooperation and enforcement. I feel that all countries cannot align on this, rendering the global minimum tax approach useless. Without global cooperation, MNCs will continue exploiting gaps and inconsistencies between jurisdictions. Countries that refuse to implement or enforce the tax could become new tax havens, defeating the purpose of the tax. Moderate corporate tax increases in a balanced approach and infrastructure investment incentives might be a more subtle and workable answer to this worldwide challenge.
Further research on the global minimum tax should focus on how increased tax revenues are allocated toward public services in lower-income countries, particularly in a region like Sub-Saharan Africa, where underinvestment in healthcare and education is a persistent issue. While the policy is intended to level the fiscal playing field and curb tax base erosion, its real-world effectiveness depends on revenue generation and how these funds are deployed. By conducting interviews with tax officials, policymakers, and economists in this region, we could gain more accurate and region-specific insights. Moreover, research could assess how developing economies adapt to the policy, especially those that previously relied on low corporate tax rates to attract foreign investment. Evaluating these outcomes would help determine whether the global minimum tax achieves its goal of promoting fairer global economic development—such a scenario may even allow me to consider supporting the global minimum tax.
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