The global minimum tax and the Uruguayan zero-sum fallacy

A discussion has arisen in Uruguay that seems technical, but in reality hides a trap. The government argues that, with the new global minimum tax promoted by the OECD, companies located in free zones will still end up paying. "If they don't pay it here, they pay it in their country of origin. So, it's better for them to pay it in Uruguay." Stated this way, it even sounds logical. However, this is a fallacious line of reasoning.

First, because it stems from a basic confusion: paying taxes in one country is not the same as paying them in another. For a company, being taxed by Uruguay means making its operations here more expensive and making investment less profitable. In its country of origin, on the other hand, it may have deductions, reinvestment schemes, or room to maneuver for compensation. It is not neutral, much less indifferent.

You may also be interested in...

Second, because it assumes that capital will stay anyway. As if companies had no choice. The reality is different: capital is mobile and moves wherever there are competitive conditions. If Uruguay eliminates the fiscal appeal of its free zones, companies can migrate to Panama, Chile, or Costa Rica without any problem. What is now investment, employment, and economic spillover here could be nothing tomorrow.

Third, because it destroys the very reason for free zones to exist. These regimes are not a whim: they are the only tool a small country has to differentiate itself from giants. By taxing what was previously exempt, Uruguay loses its value proposition. With that, it loses companies, skilled jobs, and the possibility of integrating into global value chains.

You may also be interested in...

Fourth, because it falls into the zero-sum illusion: as if it made no difference who collects the revenue. This is not the case. For Uruguay, the difference is between having a multinational generating thousands of jobs or that same company never setting up shop. For the company, the difference lies in legal certainty and long-term planning. For people, the difference is having a job or not.

It is worth recalling here what Rothbard taught us: every tax is immoral, because it means the State forcibly appropriates the fruit of someone else's labor. There is no technical makeup that can turn it into something legitimate. As David Friedman emphasized, beyond immorality, taxes also do not work as the bureaucrat promises: they distort incentives, discourage investment, and end up generating effects contrary to those they claim to pursue.

You may also be interested in...

Beyond the government's fallacious argument, the underlying problem is the one you already understand: taxes are neither free nor neutral. They always fall on someone: the consumer, the worker, or the investment that never arrives. In this case, the tax burden disguised as "international harmonization" punishes a small country whose only competitive tool is to offer better conditions than the large ones.