Yoon Tae-sik, Deputy Minister for Economic Affairs, Supports "Minimum Corporate Tax Rate of 15%" at OECD Ministerial Council Meeting

Attendance at the 2nd Ministerial Council Meeting in 2021

Support for Abolishing Similar Systems Including the French Digital Services Tax
"Request to Deduct a Fixed Percentage of Manufacturing Book Value" Mentioned

Matthias Cormann (right), Secretary-General of the Organisation for Economic Co-operation and Development (OECD), and Tony Blinken (left), U.S. Secretary of State, hold a joint press conference as they conclude the 60th OECD Ministerial Council Meeting (MCM) on the 6th (local time) in Paris, France. (Photo by AFP)
sungok@yna.co.kr
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[Sejong=Asia Economy Reporter Moon Chaeseok] The Ministry of Economy and Finance announced on the 7th that Yoon Tae-sik, Director General for International Economic Affairs (Vice Minister), attended the OECD Ministerial Council Meeting and stated that South Korea supports the global minimum tax rate of 15%.

Director General Yoon participated in the digital tax-related breakfast session and the green future session at the '2021 OECD 2nd Ministerial Council Meeting' held in Paris, France, on the 5th and 6th (local time). This annual event, attended by ministers from 38 OECD member countries, discusses the global economy. The theme of this meeting was 'Common Values for Achieving a Green and Inclusive Future.' South Korea attended as a vice-chair country, with Director General Yoon, Foreign Minister Chung Eui-yong (chief representative), Second Vice Minister Cho Kyung-sik of the Ministry of Science and ICT, and Ye Han-gu, Director General of Trade Negotiations at the Ministry of Trade, Industry and Energy, among others.

At the digital tax working breakfast, the OECD Secretariat presented the international tax Pillar 1 and 2 agreements released in July, the progress of discussions among members of the Inclusive Framework (IF), remaining issues, and future plans. The remaining issues are planned to be agreed upon at the IF plenary meeting scheduled for the 8th (local time), followed by subsequent work for each country's legislation. Pillar 1 is a system where multinational corporations are taxed in the countries where they generate revenue, and Pillar 2 introduces a global minimum tax rate, granting other countries the right to tax companies that are taxed at a rate lower than this minimum. The global minimum tax rate has been set at 15%, which some countries with lower domestic tax rates had opposed.

The Ministry of Economy and Finance reported that Director General Yoon mentioned at the session, "Regarding Pillar 1, we support the abolition and prohibition of digital services tax (DST) and similar other taxes, and regarding Pillar 2, South Korea supports the 15% minimum tax rate." Pillar 1 grants taxing rights to the country where the multinational corporation is located for 20-30% of the excess profits exceeding a 10% routine profit margin from multinational corporations with consolidated revenues of 20 billion euros and a profit margin of over 10%. Director General Yoon's message was that he agrees with abolishing systems like France's DST, which may overlap with this. Regarding Pillar 2, South Korea expressed no particular objection to the 15% tax rate. However, since industries like manufacturing have a low risk of base erosion, he mentioned that the 'substance-based carve-out'?which deducts a certain percentage of payroll and tangible asset book value from the tax base?should be sufficiently applied. In other words, he requested consideration for expanding manufacturing tax deduction benefits.

In the green future session, the OECD emphasized the importance of technological and systemic innovation for climate change response and carbon neutrality. The 'system innovation' emphasized by the OECD at the Ministerial Council Meeting is a concept that encompasses not only technology development but also improvements in governance and innovative business models beyond technology. It stressed the need for unprecedented levels of investment to achieve the 2015 Paris Agreement goal of limiting the global temperature rise to within 2°C above pre-industrial levels by the end of the 21st century. To this end, it mentioned the need to promote green finance by establishing green taxonomy and ESG (environmental, social, and governance) evaluation systems.

The Ministry of Economy and Finance reported that Director General Yoon introduced South Korea's 'Carbon Neutrality Basic Act enactment,' 'Climate Response Fund establishment,' and 'Korean-style green taxonomy (K-taxonomy).' He also emphasized that the international community must accomplish three things to promote inclusive and green growth: ▲ apply carbon border adjustment mechanisms according to each country's economic situation, ▲ actively pursue the 'system innovation' proposed by the OECD, and ▲ closely collaborate so that policy recommendations and evaluations from various international organizations such as the OECD, International Monetary Fund (IMF), World Bank (WB), and United Nations (UN) create synergy.

Meanwhile, at this Ministerial Council Meeting, the OECD discussed policies to address challenges such as climate change and widening inequality and adopted two declarations. The declarations included commitments to uphold common values such as market economy, free trade system, rule of law, and environmental sustainability. Additionally, ministers adopted a statement related to equitable vaccine distribution and expectations for the 26th Conference of the Parties (COP26) to be held at the end of this month, including the announcement of enhanced Nationally Determined Contributions (NDCs) and long-term strategies for greenhouse gas reduction.

This content was produced with the assistance of AI translation services.