{"id":10124,"date":"2023-06-20T08:40:00","date_gmt":"2023-06-20T07:40:00","guid":{"rendered":"https:\/\/www.taxpolicy.org.uk\/?p=10124"},"modified":"2023-06-21T13:34:35","modified_gmt":"2023-06-21T12:34:35","slug":"pillartwo","status":"publish","type":"post","link":"https:\/\/heacham.neidles.com\/2023\/06\/20\/pillartwo\/","title":{"rendered":"So you dislike the OECD global minimum corporate tax? Tough. The UK now has to implement it, or we’ll lose out."},"content":{"rendered":"\n

The reason for this is simple:<\/p>\n\n\n\n

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There are 137 countries coloured on that map. Each has signed up to the OECD global minimum tax (sometimes referred to as GLoBE or “Pillar Two”). <\/p>\n\n\n\n

Some are already implementing – including such free market stalwarts as Singapore<\/a>. Others are discussing implementation details. And many others have signed but are yet to kick off implementation – international tax measures are always slow, and there have been<\/a> distractions<\/a>. There is an interactive version of our OECD globe here<\/a>.1<\/a><\/sup>And the code is on our GitHub here<\/a><\/span><\/p>\n\n\n\n

This means GLoBE is likely to have a critical mass of implementing countries. Its design renders that very important.<\/p>\n\n\n

GLoBE’s design brilliance<\/h2>\n\n\n

There have been many other international tax proposals over the years to end, or at least reduce, “tax competition”2<\/a><\/sup>Views differ on what precisely “tax competition” is, whether there has been a “race to the bottom”<\/a>, and whether it is a good thing, bad thing or both. This post isn’t about that – it’s about the narrow question of how Pillar Two works, and the incentives it creates<\/span>. They’ve almost3<\/a><\/sup>The big exception is the Destination-Based Cash Flow Tax<\/a>, which I will write more about in the future<\/span> suffered from a fatal flaw – they reward countries that don’t follow the crowd. It’s a particular problem with the various unitary tax proposals where every country taxes companies on the basis of the same formula (which typically takes into account the location of sales, employees and assets). That creates a massive incentive on countries to apply a slightly different formula – tada, tax competition is back! And an obvious incentives for other countries to simply not sign up at all. <\/p>\n\n\n\n

The OECD global minimum tax is much smarter than that. It has three main components:<\/p>\n\n\n\n