The Tax Cuts and Jobs Act (TCJA) in 2017 took a new direction for the treatment of U.S. multinationals. Six significant reforms departed from the old system:
The U.S. no longer has a worldwide tax system for taxing corporate income. But it does not have a truly territorial system either. Instead, the U.S. now has a hybrid system with some worldwide taxation, without deferral, for certain foreign income because of GILTI and Subpart F and a tax on certain cross-border transactions.
Countries participating in the OECD Inclusive Framework’s negotiations on cross-border tax rules hope to reach an agreement by mid-2021. After negotiations stalled somewhat in 2020, there is hope that US Treasury Secretary Janet Yellen’s commitment to reaching an agreement will allow progress to be made this year.
The posts below include our research and analysis of policies related to cross-border tax rules, including Global Intangible Low Tax Income (GILTI), Foreign Derived Intangible Income (FDII), Base Erosion and Anti-abuse Tax (BEAT), and the Global Anti-base Erosion (GloBE) rules in the context of the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
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Over the course of the last year, it has become clear that Democratic lawmakers want to change U.S. international tax rules. However, as proposals have been debated in recent months, there are clear divides between U.S. proposals and the global minimum tax rules.
Leaders around the world are quickly moving to finalize an agreement on a global minimum tax in 2021, based on the so-called “Pillar Two” proposal from the OECD.
The Biden administration’s international tax proposals would impose a 7.7 percent surtax on the foreign profits of U.S. multinationals, resulting in a net increase in profit shifting out of the U.S.
The international corporate tax changes in President Biden’s tax plan would increase tax rates on domestic income more than on foreign income, resulting in a net increase in profit shifting out of the US, according to our Multinational Tax Model.
Since only U.S. businesses pay the GILTI tax, not foreign businesses, it makes U.S.-based brands less competitive abroad. Whatever its intentions, GILTI is a flawed policy, and doubling down on it will hurt us abroad, and at home.
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 Spanish election results are moving the country away from pro-growth tax reforms while launching the government’s tax agenda, and the agenda of the Spanish presidency of the Council of the European Union, into uncertainty.
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.
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.
What can Former President Trump’s previous tariff efforts—specifically the safeguards he authorized on imported washing machines in 2018—tell us about his most recent proposal for a 10 percent tariff on all imports?
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.
For many Italian banks, there hasn’t been a significant “windfall” to tax. The profit margins of Italian banks have been lower compared to other industries for the past two decades.
Carryover tax provisions help businesses “smooth” their risk and income, making the tax code more neutral across investments and over time.
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.