Mason: A Wrench In The GLOBE's Diabolical Machinery

Ruth Mason (Virginia; Google Scholar), A Wrench in the GLOBE's Diabolical Machinery, 99 Tax Notes Int'l 1391 (September 19, 2022):

In this article, Mason explains how the global anti-base-erosion rules induce cooperation by states, and how the proposal to enact those rules via a directive in the European Union undermines that inducement to cooperate.

Conclusion
This no-exit quality of the GLOBE rules motivated commentators at the International Fiscal Association to describe it as devilish and diabolical. No state can escape its logic or after adoption reaches a critical mass its reach. It trips states of an effective means of defection rom the cooperative outcome.

But the proposal to enact GLOBE via an EU directive reintroduces an effective method of defection. Because EU tax directives require the unanimous consent of the EU member-state finance ministers, refusal of even one state's inister to sign on to the directive scuttles the whole thing. Whereas GLOBE's diabolical machinery was designed to divest all states of effective means of defection, the EU directive procedure grants every single member state an effective veto over the EU's participation.

In the last few months, we have seen first Poland and now Hungary hold up the directive deed hold up Europe by threatening to vote against it. Although no one knows exactly how
my countries (or which ones) are needed to set GLOBE's diabolical machinery into motion, it's safe to say that neither Hungary nor Poland is near the top of anyone's list. Put differently, even if they decided never to implement the GLOBE rules, neither Poland nor Hungary, nor both together, has enough economic clout to stand against the economic logic of the GLOBE rules. But EU law gives Poland and Hungary the legal clout they need to block GLOBE for Europe, and maybe the world.

This suggests that the strategy to enact the GLOBE rules as a directive in Europe may be faulty. Setting aside the legal advantages that arise fromm enacting the GLOBE rules through a directive rather than enacting them unilaterally in each member state, the logic behind enactment via a directive may have been that simultaneously delivering many states' cooperation would exert significant pressure on other states - especially the United States - to likewise adopt the rules. But rather than multiplying the inducement to join the GLOBE regime, the decision to enact the rules as a directive seems instead to have prevented or at least delayed its enactment by the countries in Europe that are its most ardent supporters. That the EU legislative process reintroduces effective means for EU countries to defect from the GLOBE agreement that is, that the EU directive procedure halts the diabolic machinery of redundant fiscal fail-safes has not escaped the attention of EU finance ministers in member states that support the deal. On September 9, the finance ministers of France, Germany, Italy, the Netherlands, and Spain released a statement renewing their commitment to implement the minimum tax by any possible means. The analysis presented here suggests that unilateral enactment (or enhanced cooperation) could be a more viable path forward than an EU directive.