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).
International Tax Rules Primer U.S. Tax Competitiveness Primer GILTI Primer FDII Primer Learn more with TaxEDU
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.
5 min read
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.
25 min read
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.
60 min read
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.
33 min read
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.
51 min read
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.
4 min read
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?
6 min read
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.
7 min read
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.
39 min read
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.
4 min read
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.
5 min read
Carryover tax provisions help businesses “smooth” their risk and income, making the tax code more neutral across investments and over time.
3 min read
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.
5 min read
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.
4 min read
Short FormThe technical rules that were once solely the province of tax wonks in D.C. and Paris are being brought out into the public sphere.
5 min read
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.
6 min read
The EU’s recent VAT reform is an example of a win for governments, consumers, and companies. Charting a new path toward a more successful tax system.
4 min read
The European Commission proposed a new source of revenue as part of its second basket of own resources: a “temporary statistical own resource based on company profits.” This is an attempt to bolster the EU’s budget as it repays its debt.
5 min read
This tax reform plan would boost long-run GDP by 2.5%, grow wages by 1.4%, and add 1.3M jobs, all while collecting a similar amount of tax revenue as the current code and reducing the long-run debt burden.
39 min read
It’s unlikely these implemented and proposed windfall taxes will achieve their goals of raising additional revenues without distorting the market. Instead, they would penalize domestic production and punitively target certain industries without a sound tax base.
13 min read
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.
4 min read
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.
6 min read
The legislation follows from the bipartisan concern regarding tax policies adopted by other countries specifically targeting U.S. businesses or the U.S. tax base.
6 min read
While research on optimal taxation often focuses on the pure economic implications, it rarely considers cultural and societal differences that can lead to very different outcomes when trying to implement an optimal tax system.
4 min read