On 19 August 2023, at the ASEAN Economic Ministers’ meeting, the Chair of the ASEAN Investment Area (AIA) Council called for a review of the global minimum tax that is being implemented under Pillar Two of the OECD two-pillar international tax initiative. The Chair noted that the global minimum tax will affect investment incentives and should be reviewed to ensure that it does not only benefit those developed countries with strong investment competitiveness.

The implementation of the global minimum tax would affect the investment incentives currently offered by developing countries to promote foreign investment in their countries. The application of a top-up tax if rates fall below the minimum tax rate would cause many current tax incentives to lose their effect. However, developing countries all need to attract investment to make progress in developing their economies and tax incentives are an important part of their investment policy.

The Chair, who is currently Indonesia’s Minister of Investment, also argued that early implementation of the global minimum tax would disrupt the commodity downstreaming program currently promoted by Indonesia, because the tax changes would mean that investors from developed countries would prefer to invest in their home countries.

Indonesia’s commodity downstreaming policy aims to enhance mineral downstreaming processes and add value to its mineral products, so that it is more than just a raw material exporter. The policy would be for the initial stages of downstreaming to take place in Indonesia, with subsequent stages potentially carried out in other places.

In the view of the Chair the global minimum tax of 15% would set up an obstacle to developing countries that are promoting downstreaming because investors with the necessary technology would no longer have the same incentive to invest in developing countries. The result would be to force developing countries to send raw materials to developed countries for processing and put an end to the downstreaming policy.