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.
28 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
While there are several parts of the policy that are subject to further discussion and agreement, GloBE is expected to be different from GILTI in several ways.
1 min read
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
The Tax Foundation’s “State Tax Policy Boot Camp,” is ideal for anyone interested in gaining a better understanding of state taxation.
2 min read
Developed countries have on average become more reliant on consumption taxes and less reliant on individual income taxes. These policy changes matter, considering that consumption-based taxes raise revenue with less distortionary effects than taxes on income.
16 min read
As the House Ways and Means Committee continues working on the latest round of fiscal relief amid the pandemic, one curious provision in the legislation is a tax hike on multinational companies. One section of the legislation would repeal a provision in current law that allows U.S. multinationals to choose to allocate their interest costs on a worldwide basis (more on that in a moment).
4 min read
This week, the Treasury Department added several new appointees as staffing continues following President Biden’s inauguration. Among them were three scholars of international tax policy: economist Kimberly Clausing and law professors Rebecca Kysar and Itai Grinberg. These three will be influential in developing the administration’s approach to changing U.S. tax rules for multinational corporations and negotiating international tax policy changes at the Organisation for Economic Co-operation and Development (OECD).
4 min read
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.
4 min read
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.”
3 min read
The Tax Foundation response to the OECD public consultation document on the reports on the OECD Pillar 1 and OECD Pillar 2 blueprints.
16 min read
Our new guide identifies key areas for improvement in UK tax policy and provides recommendations that would support long-term growth without putting a dent in government revenues.
24 min read
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.
6 min read
While there is still plenty of work to be done to get unemployed Americans back to work, the U.S. economy as a whole is now recovering strongly from the pandemic-induced economic downturn, outperforming forecasts from earlier in the year and outperforming most other developed countries.
4 min read
Our International Index compares OECD countries on over 40 variables that measure how well each country’s tax system promotes sustainable economic growth and investment.
13 min read
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.
4 min read
Tax treaties usually provide mechanisms to eliminate double taxation and can provide certainty and stability for taxpayers and encourage foreign investment and trade. A broad network of tax treaties contributes to the competitiveness of an economy.
1 min read
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.
5 min read