IMF To Asean: Avoid Tax Competition

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IMF, Asean, corporation tax, competition, cooperation, Sustainable Development Goals,
At 17%, Singapore has the lowest corporation tax in Asean.

The International Monetary Fund has urged Asean countries to step up cooperation over tax issues, in particular to avoid tax competition and to create a fair playing field in the region. 

IMF deputy managing director Mitsuhiro Furusawa said at a high-level conference on international taxation in Asia last week that issues of tax competition cannot be tackled in isolation. “Governments need to work together on a regional basis to increase cooperation,” he said at the conference in the Indonesian capital Jakarta. “This will facilitate and reinforce domestic action to protect tax bases and reduce the spillovers from competition. So Asean’s response needs to be based on cooperation.”

Chea Kok Hong, deputy director of the macroeconomic and fiscal policy department at the  Ministry of Finance of Cambodia, said tax competition in Asean was intensifying even though the regional group wanted a standard tax system in the region. He continued however, to say that a lot of work still had to be done among all Asean members while there was a big gap between the rich members and low-income members such as Cambodia, Laos, Myanmar and Vietnam (CLMV).

“Yes, we do agree that the tax competition among Asean has intensified and Cambodia also has other rules to improve,” he said. “If we think we can converge on 20 per cent corporate tax and we have an objective to achieve the Sustainable Development Goals by 2030, and we have a common objective to respond to our domestic political pressure, then should we not go further and let low-income countries adjust their administration to raise the level of the playing field?” he said.  That being the case, “how can we identify the platform to collaborate? If we look at Asean, its competency is very large in term of institutional and infrastructure capability. In terms of the revenue structure within CLMV countries, our institutional infrastructure capability still has huge gaps, so what we are going to do?”

There is a need for comprehensive coordination, capacity building and more cooperation, Kok Hong said. Information sharing is needed for all members to meet the common goals. “Of course, we have a common goal to achieve Sustainable Development Goals,” he said. In order to bring that about he suggested that Asean “have more platforms for exchanges of information and allow the low-middle income Asean countries to prepare themselves, to understand the issues and impacts.”

Astera Primanto Bhakti, assistant to the Indonesian Minister of Finance for state revenue policy, said all Asean members had to set out baselines to push for the realisation of the Sustainable Development Goals. “I think Cambodia has not completed the network with all Asean countries,” said Bhakti. “What we want to look at is finding commonality in issues before we can harmonise things. Again it is not going to be easy,” he added. “We have to discuss first the baseline which is very important because without [it] we will distort the whole tax system in the country.”

Cambodia, along with fellow Asean countries Brunei and Thailand, has a low corporate tax of 20 per cent. Singapore has the lowest at 17 per cent.

This article was originally published in the Khmer Times.