Monday, May 1, 2023
Reuven S. Avi-Yonah (Michigan; Google Scholar) has posted three tax papers on SSRN:
Follow the Money: Why Is International Tax Bilateral?:
International tax law has traditionally been built upon bilateral treaties and unilateral actions, while trade law has traditionally been multilateral and international investment law has been bilateral but with Most Favored Nation (MFN) clauses that render it effectively multilateral. This paper explores the reasons and asks whether they are still valid.
Why 15%? Justifying the Global Corporate Minimum Tax:
The global corporate minimum tax (GLoBE) as embodied in Pillar 2 of the OECD/IF BEPS 2.0 proposal was set in October 2021 at 15% of the financial statement income of within scope MNEs. That is also the rate and the base of the new US corporate alternative minimum tax (CAMT). The Single Tax Principle (STP) on which Pillar 2 is built suggests that the rate should be the average OECD corporate tax rate (about 23%). So, is the 15% rate only a concession to political reality? No, because it represents a justifiable compromise between the three goals of the corporate tax.
What Does the US Get from Pillar 2?:
In recent months, there has been a sharp increase in criticism leveled in the US against Pillar 2 of the G20/OECD BEPS 2.0 effort. Specifically, it has been argued that Pillar 2 (and especially the UTPR) is inconsistent with US tax treaties, that Pillar 2 is not needed to address profit shifting, and that the US is unlikely to derive revenue from Pillar 2. None of these arguments are persuasive. Pillar 2 is consistent with the treaties, it addresses profit shifting, and while the US may or may not derive revenue from it, that is not the point of Pillar 2 or of the corporate tax. Finally, while the UTPR may limit some US tax expenditures, that is not clearly the case, and if it does then the same goals may be achieved by other means.