The Potential Impact of Pillar Two on Tax Incentives

• Autores: Niels Bammens, Dieter Bettens
• Localización: Intertax, ISSN 0165-2826, Vol. 51, Nº. 2, 2023, págs. 155-169
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • After lengthy negotiations, the OECD proposed its model rules on Global Anti-Base Erosion Rules (GloBE) on 20 December 2021. They impose a minimum tax rate of 15% on large multinational companies wherever they operate. Consequentially, the GloBE rules are intended to render tax incentives ineffective to the extent that they reduce the effective tax rate (ETR) on in-scope entities below 15%. Moreover, tax competition should also level off at 15% as tax incentives would no longer increase the attractiveness of a jurisdiction to the extent that they reduce the ETR below this amount. Nevertheless, several design aspects of Pillar Two risk obstructing those objectives. Most notably, the substance based carve-out excludes routine profit from substantive activities from the scope of the GloBE rules on a formulaic basis. This means that incentives can theoretically be maintained and tax competition can continue for this income. In practice, however, the design of the carve-out entails that it does not distinguish between incentives for substantive income and those for non-substantive income. Moreover, the combination of the substance based carve-out and the qualified domestic minimum top-up tax (QDMTT) could result in a new form of tax competition.