The Perceived (Un)Fairness of the Global Minimum Corporate Tax Rate

Abstract

The global agreement to introduce a minimum corporate income tax rate is arguably one of the most important tax policy developments of the last decades. Yet, there are growing concerns over its fairness. The aim of this paper is to consider the impact of process on fairness perceptions, drawing insights from public economics, political science, legal philosophy, and social psychology literature. It first argues that, whilst the agreement may yield some positive outcomes for all, particularly in terms of tax sovereignty and tax morale, any assessment of the fairness of these outcomes should be dependent upon their benchmarking. Against the wider benchmark of global FDI allocation, and in the presence of other inequalities and economic distortions, the agreement cannot be regarded as fair, despite those positive outcomes. It then considers the procedural elements of the deal, arguing that increased inclusiveness does not necessarily result in a fair process, most specifically where the process does not ensure adequate voice and respect for all parties. It concludes that, given the significance of procedural justice for perceptions of fairness, particularly where outcomes are unfavourable, the agreement is likely to be perceived as unfair, regardless of potential gains.

Keywords: Tax policy, Corporate Taxation, International Tax Policy, Tax Coordination, Tax Competition