In recent years, several countries have taken measures to reduce carbon emissions, including instituting environmental regulations, emissions trading systems, and carbon taxes. In 1990, Finland was the world’s first country to introduce a carbon tax.
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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.
The United Nations (UN) is preparing to flex its muscles on international tax policy. Several developing countries say the OECD’s approach favors richer countries at their expense, and the UN hopes to fix this.
Canada is planning to join the club of countries that, in the past 3 years, introduced a digital services tax (DST) despite U.S. opposition and concerns expressed by Canadian businesses.
The technical rules that were once solely the province of tax wonks in D.C. and Paris are being brought out into the public sphere.
Simplifying international tax rules will not solve all the challenges that stand in the way of healthy cross-border investment, but eliminating unnecessary provisions would be a positive pivot relative to the trajectory of recent years. It’s high time that policymakers stopped pursuing ever more complex rules and started the hard work of simplification.
Given that wealth taxes collect little revenue and have the potential to disincentivize entrepreneurship and investment, perhaps European countries should repeal them rather than implement one across the continent.
The agreement represents a major change for tax competition, and many countries will be rethinking their tax policies for multinationals in light of it. However, with both the U.S. and EU hitting roadblocks in their respective legislative processes, it is unclear when or even if the agreement will be implemented. If implementation fails, a return to a world of distortive European digital services taxes and retaliatory American tariffs could be on the horizon.
The National Foreign Trade Council’s survey shows that the private sector recognizes the economic value of treaties as an instrument to increase tax certainty and decrease distortions.
As the UTPR is a new concept, it is worth explaining what it is and why Rep. Smith cares about it. In a sentence, the Undertaxed Profits Rule (UTPR) is a looming extraterritorial enforcement mechanism for a tax base the U.S. has not adopted.