Base Erosion and Profit Shifting (BEPS)

U.S. Cross-border Tax Reform and the Cautionary Tale of GILTI

The Biden campaign and Senate Democrats identified changes to GILTI that would increase the taxes U.S. companies pay on their foreign earnings. Rather than tacking on changes to a system that is currently neither fully territorial nor worldwide, policymakers should evaluate the structure of the current system with a goal of it becoming more, not less, coherent.

The European Commission and the Taxation of the Digital Economy

The consultation on the EU’s digital levy provides an opportunity for policymakers and taxpayers to reflect on the underlying issues of digital taxation and potential consequences from a digital levy. Unless the EU digital levy is designed with an OECD agreement in mind, it is likely to cause more uncertainty in cross-border tax policy.

Day 2 of OECD Consultation on International Tax Reform Blueprints

The OECD consultation is in the context of the Inclusive Framework on Base Erosion and Profit Shifting which is made up of delegates from more than 135 countries and is focused on policies that reduce opportunities for tax avoidance by multinational companies. The current proposals being considered would change both where and how much companies pay in corporate taxes.

Day 1 of OECD Consultation on International Tax Reform Blueprints

The first session was focused on Pillar 1 of the OECD proposal. The pieces in Pillar 1 would change tax rules so that companies would be paying more taxes in countries based on the location of customers. This approach would move more tax revenues into so-called “market countries.”

Tax Foundation Response to OECD Public Consultation Document: Reports on the Pillar One and Pillar Two Blueprints

The Tax Foundation response to the OECD public consultation document on the reports on the OECD Pillar 1 and OECD Pillar 2 blueprints.

Patent Box Regimes in Europe

Patent box regimes (also referred to as intellectual property, or IP, regimes) provide lower effective tax rates on income derived from IP.

Comparing Europe’s Tax Systems: International Tax Rules

International tax rules define how income earned abroad and by foreign entities are taxed domestically, making them an important element of a country’s tax code.

Two Roads Diverge in the OECD’s Impact Assessment

The difference that the OECD presents between the potential impact in the context of agreement compared to a harmful tax and trade war should show policymakers the value of continuing multilateral discussions.

Pillars, Blueprints, an Impact Assessment, and Construction Delays

The OECD released blueprints for proposals on changing international tax rules alongside an impact assessment based on the overall design of the proposals. While the blueprints cover proposals both for changing where large multinationals owe corporate tax and designing a global minimum tax, there are still many unanswered questions. In the meantime, other digital tax proposals are moving forward and have the potential to result in a harmful tax and trade war.

Designing a Global Minimum Tax with Full Expensing

The design and implementation of a global minimum tax is not simple and straightforward. There are dozens of challenging issues that policymakers will need to consider. So, when it comes to the way the minimum tax treats new investment, it seems clear that incorporating full expensing into the design would have significant benefits.

Thin-Cap Rules in Europe

To discourage a certain form of international debt shifting, many countries have implemented so-called thin-capitalization rules (thin-cap rules), which limit the amount of interest a multinational business can deduct for tax purposes.

CFC Rules in Europe

To prevent businesses from minimizing their tax liability by taking advantage of cross-country differences in taxation, countries have implemented various anti-tax avoidance measures, one known as Controlled Foreign Corporation (CFC) rules.

Where Should the Money Come From?

The fiscal response to the COVID-19 pandemic will require policymakers to consider what revenue resources should be used to fill budget gaps. Tax policy experts have proposed wealth taxes, (global) corporate minimum taxes, excess profits taxes, and digital taxes as opportunities for governments to raise new revenues.

Patent Box

Territorial Tax System

Decades in Corporate Taxation

Corporate taxation has evolved significantly, with rates coming down significantly over the last several decades. Countries have redesigned their tax bases by changing the treatment of losses, interest, and capital costs. A recent OECD report highlights the general stabilization of corporate tax revenues and statutory rates alongside major changes to address profit-shifting opportunities.

A Blow to Pillar 1

The U.S. has called for a pause in global digital tax negotiations, dealing a blow to Pillar 1 of the OECD’s international tax project. What happens next could be very harmful for the global economy.

The U.S. Trade Representative Expands Its Digital Services Tax Investigations

The U.S. Trade Representative (USTR) expanded its digital service tax investigations, announcing Section 301 investigations into digital tax policies in nine countries and the European Union. The announcement follows an investigation of the French digital services tax that was completed in 2019, after which the USTR threatened significant #tariffs in retaliation against France.

Digital Taxation Around the World

The digitalization of the economy has been a key focus of tax debates in recent years. Our new report reviews digital tax policies around the world with a focus on OECD countries, explores the various flaws and benefits associated with the wide set of proposals, and provides recommendations for lawmakers to consider.

Digital Services Taxes: Do They Comply with International Tax, Trade, and EU Law?

A digital services tax like the one implemented by France likely violates both the General Agreement on Trade in Services and a model U.S. free trade agreement. However, it is uncertain whether meaningful relief could be obtained under either regime.