Paul L. Caron

Friday, March 24, 2023

Pistone Presents The Implications Of Pillar II (Globe) For Developing Countries Today At Boston College

Pasquale Pistone (Visiting Professor, NYU; Academic Chairman, IBFD (The Netherlands); Professor of Tax Law, University of Salerno (Italy); Jean Monnet ad Personam Chair in European Tax Law & Policy, WU Vienna (Austria); Google Scholar) presents The Implications of Pillar II (Globe) for Developing Countries at Boston College today as part of its Tax Policy Workshops hosted by Jim Repetti: 

PistoneThe desirable global tax governance goal of preventing the race to the bottom should not justify the bias that the Pillar II version of GloBE might in some cases to produce in favour of domestic over foreign investment. By neutralizing tax incentives in cross-border, but not in domestic situations, the GloBE top-up tax (IIR) puts developing countries, which mostly rely on foreign capital, at a systematic disadvantage when their tax incentives reduce corporation taxes below the global corporate minimum rate. This hidden collateral effect of GloBE might undermine the right of such countries to remain the masters of their international tax policy decisions and pursue their economic development without external interferences. For such reason, it might be questioned from the perspective of fairness and legitimacy. 

More work might be needed to restore inclusive solutions of global tax governance, which overcome such critical issues and the ones that might arise as to the consistency of the US GILTI rules with the GloBE IIR. By contrast, the path followed by the European Union with the GMT Directive seems to go in the right direction. By including the non-discrimination principle, developed by CJEU on fundamental freedoms, the EU GMT secures neutrality between domestic and foreign investment, thus achieving more fairness and inter-country equity for international taxation.

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