<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The OECD Programme of Work on the tax challenges arising from the digitalization of the economy comprises a so-called GloBE (Global Base Erosion) or Pillar Two proposal, consisting of a series of measures aimed at establishing a floor to tax competition by achieving minimum taxation of the income obtained by in-scope multinational enterprises. If such a measure is implemented, developing countries would be severely deprived of the possibility to grant tax incentives to attract FDI and potentially foster economic growth. This contribution emphasizes the importance of the thorough review of their tax policy preferences that developing countries should undertake amidst the rapid adoption of GloBE, which the OECD is pushing to achieve. To illustrate this concern, an examination of implementation issues shows that a deficient enactment of the income inclusion rule proposed in GloBE could paradoxically trigger the applicability of tax sparing clauses aimed at protecting the effectiveness of tax incentives, even when both sets of rules pursue opposing goals.</p>
</abstract>

The OECD Programme of Work on the tax challenges arising from the digitalization of the economy comprises a so-called GloBE (Global Base Erosion) or Pillar Two proposal, consisting of a series of measures aimed at establishing a floor to tax competition by achieving minimum taxation of the income obtained by in-scope multinational enterprises. If such a measure is implemented, developing countries would be severely deprived of the possibility to grant tax incentives to attract FDI and potentially foster economic growth. This contribution emphasizes the importance of the thorough review of their tax policy preferences that developing countries should undertake amidst the rapid adoption of GloBE, which the OECD is pushing to achieve. To illustrate this concern, an examination of implementation issues shows that a deficient enactment of the income inclusion rule proposed in GloBE could paradoxically trigger the applicability of tax sparing clauses aimed at protecting the effectiveness of tax incentives, even when both sets of rules pursue opposing goals.

Jurisdiction Not to Tax, Tax Sparing Clauses, and the OECD Minimum Taxation (GloBE) Proposal

Nordic Tax Journal

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

The OECD Programme of Work on the tax challenges arising from the digitalization of the economy comprises a so-called GloBE (Global Base Erosion) or Pillar Two...

Jurisdiction Not to Tax, Tax Sparing Clauses, and the OECD Minimum Taxation (GloBE) Proposal

Article Category: Article

Published Online: Oct 14, 2021

Page range: 6 - 19

DOI: https://doi.org/10.2478/ntaxj-2021-0004

Keywords
Jurisdiction to tax, tax sparing, tax incentives, Pillar Two, GloBE, tax treaties

© 2021 Aitor Navarro, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Jurisdiction Not to Tax, Tax Sparing Clauses, and the OECD Minimum Taxation (GloBE) Proposal

Article Category: Article

Published Online: Oct 14, 2021

Page range: 6 - 19

DOI: https://doi.org/10.2478/ntaxj-2021-0004

KeywordsJurisdiction to tax, tax sparing, tax incentives, Pillar Two, GloBE, tax treaties

© 2021 Aitor Navarro, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
Jurisdiction to tax, tax sparing, tax incentives, Pillar Two, GloBE, tax treaties