Challenges and Opportunities for Developing Countries.

This article will examine the challenges and opportunities that global minimum tax policies present for developing countries, including their potential impact on tax revenue and economic development.

Global minimum tax policies have been a hot topic in recent discussions among policymakers, economists, and multinational corporations (MNCs). While these policies aim to create a more equitable global tax system, they also present challenges and opportunities for developing countries. In this article, we will explore these aspects and their potential impact on the tax revenue and economic development of developing nations.

Challenges for Developing Countries:

1. Reduced Tax Competition

Global minimum tax policies could reduce the ability of developing countries to attract foreign investment through tax incentives and lower tax rates. This could hamper their competitiveness in the global market and hinder economic growth.

2. Erosion of Tax Base

Whilst Global Minimum Tax is introduced to combat profit shifting, the possibilities remain for companies to shift profits to certain jurisdictions, especially if the tax rate differential is significant. There is a concern that global minimum tax policies could lead to profit shifting by MNCs from developing countries to jurisdictions with lower tax rates. This could result in a significant erosion of the tax base in developing countries, reducing their ability to fund public services and infrastructure development.

3. Compliance Costs

Developing countries may face challenges in implementing and enforcing global minimum tax rules due to limited resources and expertise. This could lead to increased compliance costs and difficulties in ensuring tax compliance by MNCs operating within their borders.

Opportunities for Developing Countries:

1. Increased Tax Revenue

Despite the challenges, global minimum tax policies could help developing countries increase their tax revenue. By ensuring that MNCs pay a minimum level of tax, these policies could provide a stable source of funding for public services and infrastructure development.

2. Leveling the Playing Field

Global minimum tax policies could help level the playing field for developing countries. By reducing the incentive for profit shifting and tax avoidance by MNCs, these policies could create a more equitable tax system, ensuring that all companies pay their fair share of taxes.

3. Enhanced Investment Climate

Global minimum tax policies could also enhance the investment climate in developing countries. In effect, this will increase the importance of considering other non-tax factors in investment decision-making. By reducing the perception of these countries as tax havens and ensuring a more stable and transparent tax regime, these policies could attract more foreign investment, driving economic growth and development.

Conclusion:

In conclusion, global minimum tax policies present both challenges and opportunities for developing countries. While these policies may pose challenges in terms of tax competition, erosion of the tax base, and compliance costs, they also have the potential to increase tax revenue, level the playing field, and enhance the investment climate. Developing countries will need to carefully consider these factors and develop strategies to effectively navigate the impact of global minimum tax policies on their economies. Other factors to consider include proper enforcement of the mechanism and close monitoring of tax policies to address emerging challenges and loopholes in the global tax system.

Talk to our transfer pricing experts.

Entrepreneurs, Start-Ups, and SMEs: Don't overlook transfer pricing. Be proactive to manage compliance and risks early on to avoid future problems.

CONTACT US CONTACT US

Global Minimum Tax - The New Wave of Changes 2026

In our upcoming webinar we unpack how global minimum tax connects with transfer pricing, where we are seeing pressure points, and how tax and finance teams can respond in a practical and cost effective way.

Managing Transfer Pricing In Asia - 6th Run

Transfer pricing is a rapidly evolving area of taxation that demands attention from both tax authorities and business leaders. With the challenges of satisfying multiple jurisdictions and managing transfer pricing risks becoming increasingly complex, practical strategies are crucial for success.

Practical Perspectives on Transfer Pricing

With the release of the updated Transfer Pricing Guidelines at the end of last year, 2026 sees tax professionals now turning their attention to what these regulatory updates mean in practice.

Challenges And Opportunities For Developing Countries