Challenges related to the global minimum tax

The Global Minimum Tax (Pillar Two), initiated by the OECD/G20, is widely regarded as a significant step forward in international tax cooperation. Its objectives are to curb profit shifting, combat base erosion, and help create a fairer and more competitive environment for multinational corporations.

In recent years, many countries and major economic blocs worldwide, most notably the European Union, have proactively developed roadmaps and completed legal frameworks to implement this mechanism. However, practical implementation has revealed substantial differences in policy approaches among major economies. These differences have directly affected the structure and operation of global supply chains.

The US’s adjustment in its approach to the global minimum tax, as reflected in official statements and policy orientations of the US administration, has triggered notable changes in global trade and supply chains. This shift poses new challenges for highly open economies such as Vietnam.

While the US continues to pursue the objective of preventing tax base erosion, it has opted to implement a minimum tax regime based on its own mechanisms and timeline, aligned with its domestic legal system and policy priorities. This approach underscores the reality that the global minimum tax is not applied uniformly, but is instead heavily shaped by each country’s institutional context and national interests.

As a result, global supply chains are increasingly fragmenting along the lines of the “nationality of the parent company,” rather than operating within a unified tax framework. Multinational corporations headquartered in the United States enjoy greater flexibility in organizing production, allocating profits, and selecting investment locations, while enterprises in many other countries are required to fully comply with stricter requirements.

This fragmentation goes beyond technical tax issues and has far-reaching implications for how costs, risks, and benefits are distributed throughout the entire supply chain, from production stages to distribution in end markets such as the EU and the Czech Republic.

Rising compliance costs and stricter requirements are already affecting many Vietnamese enterprises participating in the supply chains of US corporations in key sectors such as electronics, textiles and garments, footwear, furniture, precision engineering, and processed agricultural products.

In the new context, as US companies are not subject to additional tax obligations comparable to those applied in the EU, the resulting tax benefits are largely retained at the parent-company level.

Meanwhile, requirements related to environmental and social standards, traceability, supply-chain transparency, and technical compliance under EU regulations continue to intensify and are often passed down to suppliers in third countries, including Vietnam. This places Vietnamese enterprises under growing cost pressures, while their ability to raise prices or improve profit margins remains limited.

In earlier stages, Vietnam was often viewed as a cost-competitive manufacturing base with a relatively neutral position in EU-oriented supply chains. However, as supply chains are restructured into more clearly tiered systems, higher value-added activities tend to be retained in major economic hubs, while labor-intensive and higher-risk production stages continue to be located in developing countries.

Without proactively upgrading their position within the value chain, Vietnamese enterprises risk becoming overly dependent on orders, easily replaceable, and highly vulnerable to strategic adjustments by global partners.

The need for a proactive, flexible, and long-term approach

At present, the EU, including the Czech Republic, is implementing the global minimum tax relatively comprehensively, while simultaneously strengthening regulations on sustainable development, corporate responsibility, and supply-chain oversight.

Within the same EU-oriented supply chain, Vietnamese enterprises are required to strictly comply with these standards, while some large partners benefit from differing policy approaches in their parent-company jurisdictions. As a consequence, compliance costs for Vietnamese enterprises tend to rise more rapidly, directly undermining their price competitiveness.

The Czech Republic is an important link in the EU’s supply chain, particularly in manufacturing, mechanical engineering, components, and technology industries that are deeply integrated into the EU internal market.

Facing full and consistent compliance with EU regulations on the global minimum tax, sustainable development, corporate responsibility, and supply-chain control, Czech enterprises are becoming more cautious in selecting and maintaining non-EU partners.

Partner evaluations are no longer focused solely on cost factors or short-term production capacity. Instead, they increasingly emphasize long-term stability, information transparency, governance systems, traceability capabilities, and readiness to meet compliance requirements over the medium and long term.

This trend has had direct impacts on cooperation between Vietnamese and Czech enterprises, particularly within supply chains serving the EU market. For Vietnamese firms, gaining access to or expanding cooperation with EU partners no longer depends solely on cost advantages or delivery speed, but increasingly on their ability to meet technical, environmental, and social standards, as well as their commitment to sustainable cooperation.

The analysis above demonstrates that the US adjustment in its approach to the global minimum tax is not merely a tax issue. It has generated far-reaching effects on the structure and functioning of supply chains oriented toward the EU, including those involving the Czech Republic.

As the EU implements this tax mechanism relatively comprehensively, alongside increasingly stringent requirements for sustainability, corporate responsibility, and supply-chain transparency, new demands are being placed on both Vietnamese enterprises and policymakers. These demands call for a proactive, flexible, and long-term strategic approach.

Enhancing governance capacity and sustainable integration

For Vietnamese enterprises, the challenge extends beyond fulfilling orders or maintaining cost advantages. It requires a strong focus on improving corporate governance and enhancing their capacity for sustainable integration into global value chains.

Priority should be given to strengthening corporate governance through greater financial transparency and compliance with international standards; gradually transitioning from subcontracting and assembly models toward deeper participation in higher value-added stages such as design, engineering, quality management, and high-technology activities. At the same time, enterprises should proactively diversify partners and export markets to reduce dependence on any single supply chain or group of partners, thereby increasing resilience to global strategic shifts.

From a policy perspective, it is essential to closely monitor international developments, particularly the implementation and adjustment of the global minimum tax in major economies, in order to conduct comprehensive assessments and proactively develop timely and effective policy responses.

A balanced coordination is needed between tax policy and other supporting instruments, such as infrastructure development, human-resource quality enhancement, innovation promotion, and assistance for enterprises in improving compliance capabilities. Maintaining regular and substantive dialogue with major supply-chain partners is also crucial to safeguarding the legitimate interests of Vietnamese enterprises during the integration process and mitigating adverse impacts arising from divergent policy approaches.

Overall, the US adjustment in its approach to the global minimum tax reflects significant changes in global trade relations and a clear trend toward more sharply tiered supply-chain restructuring. 

For Vietnam, particularly in its participation in EU-oriented supply chains, it is essential to identify challenges clearly, early, and comprehensively. At the same time, this context presents an opportunity to accelerate economic restructuring, enhance the quality of growth, and gradually improve the position of Vietnamese enterprises within global value chains, enabling them to continue integrating effectively and sustainably in the new global landscape.