Middle East Musings

Middle East Musings Corporate Tax Rates & the Middle East

By David Billett

Lost in the shadow of the COVID-19 pandemic, one of the most influential tax changes in history can pass without an ounce of discussion in the global media.

Led by the United States, 136 countries have agreed to implement a global corporate minimum tax, which will establish two new rules. First, all corporations that earn more than 750 million euros ($870 million) in sales globally, such as Amazon and Apple, will be taxed at a minimum of a 15% corporate tax rate. Second, countries will have taxation rights over corporations that earn profits in their jurisdiction yet lack a physical presence. For example, a corporation will no longer be allowed to do business in one country while also avoiding their corporate tax obligations. The second rule is specifically intended to target U.S. technology companies.

While at first glance the global corporate minimum tax may seem like a good idea, it must be rejected and abandoned immediately. The global corporate minimum tax will likely lead to a national security crisis in the Middle East, will inflict severe harm on small businesses, and will limit the growth of developing nations around the world.

Firstly, a global corporate minimum tax will deter foreign investment in the United Arab Emirates (“UAE”) and Bahrain. To date, the UAE and Bahrain each boast a zero percent corporate tax rate. Some may wonder, why would any country offer a zero percent corporate tax rate? In essence, offering tax benefits is a powerful tool for a country to attract foreign investors and bolster their economy. If the UAE and Bahrain are required to increase their corporate tax rate, they will lose their competitive tax advantage and will undoubtedly lose many investors, which will harm their economy.

As Iran grows in power and continues to threaten the balance of power in the Middle East, any act which

can weaken those that are determined to counter Iranian influence must be abandoned immediately. A strong economy is the foundation of all military clout, and forcing the UAE and Bahrain to increase their corporate tax rate will weaken their economies and will ultimately assist Iran in exerting more influence throughout the Middle East.

Secondly, small businesses that rely on corporate customers will be particularly harmed since corporate profits will decline. This increased tax burden will slowly force corporations to reduce their orders to small

businesses, which will result in small businesses being pressured to lower their prices. In essence, a large portion of the increased tax burden on corporations will be passed on to small businesses that are already struggling due to the COVID-19 pandemic.

Thirdly, many developing nations utilize a lower corporate tax rate to attract investors and to compete with more powerful countries. Since these countries often lack the economic might, regional security, or political power to compete with stronger nations, a low corporate tax rate is necessary to increase their competitive abilities. While the global corporate minimum tax creates a façade of equality by implementing a minimum 15% tax rate, it will only result in wealthy nations increasing their tax revenue at the expense of the developing world.

The global corporate minimum tax rate must be immediately rejected. This rule will weaken the power of the UAE and Bahrain, who act as Israel’s closest allies and are stalwarts of peace in the Middle East. As the weakening of an ally is the strengthening of an enemy, Iran will reap the unintended benefits of this deal by exerting greater influence throughout the Middle East. This rule will also inflict severe harm on small businesses and will limit the growth of developing nations. Governments around the world must immediately abandon the global corporate minimum tax and recognize that enforcing this so called “equality” will only create an equally unfair society for all.

If the UAE and Bahrain are required to increase their corporate tax rate, they will lose their competitive tax advantage.

David Billet is a student at Fordham Law School, where he is an Associate Editor of the International Law Journal. In May of 2018, David graduated from Queens College, CUNY, with a B.A. in Accounting and a minor in Economics. David additionally writes articles that focus on for-

eign affairs, domestic policy, and global anti-Semitism. To date, his work has been

featured in the Wall Street Journal, Israel Hayom, and almost twenty other media

publications.