In recent years, European countries have undertaken a series of tax reforms designed to maintain tax revenue levels while protecting households and businesses from high inflation.
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As increased political attention focuses on the state of the American worker, expect to see a resurgence of the argument that the labor share of income is in decline.
On 12 September, the European Commission released a proposal called “Business in Europe: Framework for Income Taxation” (BEFIT) and two associated proposals on transfer pricing and a Head of Office tax system.
Given enough time, everything old is new again—including tax ideas best consigned to history. But worldwide combined reporting, which a few states flirted with in the 1980s, is rearing its head again.
Congress should recognize that Pillar Two has significant U.S.-specific downsides, but also that it cannot unilaterally stop Pillar Two from taking effect. Instead, it should carefully consider a policy response for the next Congress, when a variety of forces are likely to compel it to act.
A major case pending before the U.S. Supreme Court (Moore v. United States) is calling into question provisions on large portions of the U.S. tax base which could quickly become legally uncertain, putting significant revenue at stake.
A growing international tax agreement known as Pillar Two presents two new threats to the U.S. tax base: potential lost revenue and limitations on Congress’s ability to set its own tax policy.
Bermuda, long celebrated for its pristine beaches and offshore financial services, is embarking on a journey to recalibrate its tax mix. Spurred by the OECD’s Pillar Two initiative, the island will introduce its first-ever corporate income tax in 2025.
As more and more states move away from throwback or throwout rules, those states that still impose these rules are becoming less attractive for businesses, which are incentivized to relocate their sales activities to non-throwback states.
Pillar Two implementation is underway in many jurisdictions, and many governments are aiming to get their proposals approved before the end of 2023. However, estimating Pillar Two’s impact on government revenue is proving difficult. As a result, only a few countries have publicly presented their findings.