Papers & Reports

This Article digests the OECD pillar two 15% minimum tax on the GloBE income of certain in-scope multinational enterprises. The authors believe that the pillar two rules will clash with the typical tax incentives offered by countries to attract foreign direct investments including tax holidays, lower tax rates, exemptions and accelerated depreciation regimes which are normally offered in tax treaties. Notwithstanding, the authors believe that the 15% minimum tax is a win-win solution for both investors and host states.

Loitti, Wamuyu and Owens address how the GloBE Rules and their impact on investment incentives interact with investment provisions in Regional Trade Agreements. They also consider the impact of the minimum tax on regional integration efforts and the potential for a regional approach to its implementation.

This paper analyzes the use of intellectual property (IP) rights and the most common forms of tax measures to incentivize innovation and conducts a comparative analysis between the policies adopted by the US and the European Union. In discussing the interaction between tax policy and IP rights, it notes that tax policy instruments are used for purposes that differ from revenue-raising and wealth-redistribution, and a deep investigation becomes necessary to understand whether the objectives are pursued without hampering the status quo. Rizzo argues that the system should be looked at as a whole and several considerations should be conducted to understand whether there might be different ways to reach the same objectives more efficiently and without affecting the neutrality of the tax system; and that in all cases, the proposed policy should be coherent with its objectives and avoid undesired effects. The author proposes the use of tax systems to incentivize R&D tax credits and IP Box Regimes and analyses how these innovation-oriented tax measures will work.

According to the author, capital mobility has preoccupied scholars of international taxation for more than 30 years and while capital is highly mobile, countries compete to attract investment, creating a race to the bottom, enabling multinational enterprises (MNEs) to shift profits, and recently culminating in the OECD’s proposed Global Minimum Tax, with the aim of substantially curtailing tax competition. This paper suggests, however, that the significance of mobile capital for international taxation may be largely an illusion.

Geringer’s paper seeks to explore treaty anti-abuse provisions specifically from an equality perspective. The significance of differing concepts for the assessment of tax avoidance and tax abuse in different double tax conventions has not yet been specifically evaluated through the lens of equality, and no previous studies have particularly focused on the question as to whether, to what extent, and on the basis of which concepts or principles, equal treatment for similar and possibly abusive situations ought (not) be realized at the treaty, EU or national levels. Geringer’s paper aims to rectify this, and questions the impact of unequal tax treatment in treaty application as a product of variances in anti-abuse provisions. It is based on a comparative analysis and demonstrates that these effects are likely to specifically materialize in smaller economies and developing countries.

The authors used data from the IRS to analyse the significant contributions of the IRS, corporate executives, accountants, external accounting firms and individual tax preparers on corporate tax outcomes. The paper concludes that all these parties collectively shape corporate tax outcomes, but lack of data affects the understanding of the contributions of the various parties. However, from the limited data from IRS which the authors analyzed, they found that non-C suite executives and individual tax preparers play very important roles.

Paul in this paper considers the argument that the European Commission apparently ignored the protocol it had granted to Ireland under which (in exchange for Ireland’s vote in favor of the Treaty of Lisbon), Ireland was not required to obtain EC approval when granting State Aid (to Apple or any other company). The EC’s insistence that Ireland collect an additional tax of €13 billion Euros in tax underpayments from Apple for the 2003 to 2014 period could be viewed as a breach of this protocol. Paul opines that the decision was justified given that the EC did not claim that Apple broke any specific Irish or EU laws but that its “sweet” deal with Ireland was illegal because the arrangement meant unfair competition and was therefore State Aid.

Fetter examines the possibility of an internationally coordinated climate wealth tax, to fund a just transition globally. According to Fetter, a global climate wealth tax will provide the strongest protection against wealthy individuals leaving countries for tax purposes, creating wealth leakage; and could be used to curb wealth inequality directly correlated to higher greenhouse gas emissions. She argues that the global climate wealth tax would not replace the need for a carbon tax but would simply provide another incentive targeting high-net worth individuals, who bear a greater responsibility for greenhouse gas emissions.

Mintz in this paper examines the intersection between the corporate income tax base and the proposed global corporate minimum tax. Mintz notes that the aim of the global minimum tax is to reduce the incentive for profit shifting by putting a floor on corporate tax rates so that they do not fall below 15 percent of adjusted accounting profits. However, the global minimum tax itself will introduce new capital market inefficiencies as a result of which foreign-owned capital will be subject to tax more heavily than domestic capital. He notes further that the minimum tax distorts capital allocation by favoring labor-intensive projects over capital-intensive projects. Mintz also argues that it distorts the accounting decisions of corporations when they seek to avoid paying the tax. Overall, it is not clear that the global minimum tax will work any better than other policies aimed at reducing corporate profit shifting.

According to Wilkie and Eden, there are three underlying reasons for the current lack of confidence in the international rules for taxing the global profits of multinational enterprises (MNEs), to wit: (1) tax rules are not universal or natural; (2) taxes must be practical, administrable, and collectible; and (3) tax policy is a domain where national sovereignty and multilateralism are both important and conflictual. The authors use Transfer Pricing as a case study because it affects how an MNEs global profits are allocated among countries. Wilkie and Eden then make proposals for an alternative to the arm’s length principle with inspiration from the distinction made by the International Centre for Settlement of Investment Disputes between investment and trade that underlies the four-factor Salini test: contribution, assets, risk, and duration. They argue that the Salini test provides useful insights into the conundrum of “source” and a way out of the current lack of confidence in the international tax system.