A Game-theoretic Analysis of Global Minimum Tax Design: Country-by-Country v. Global Averaging
31 Pages Posted: 27 Mar 2022 Last revised: 23 May 2022
Date Written: March 25, 2022
This paper constructs and analyzes a rudimentary game-theoretic model to better understand the policy choice between a global minimum tax regime that operates country-by-country and one that operates based on MNEs’ global average tax rates. The paper’s findings run counter to the consensus view. That view favors a country-by-country regime for two kinds of reasons: it collects more tax liability from MNEs; and it is more effective in preventing harmful tax competition among taxing jurisdictions. The model in this paper suggests that a global average regime is superior to a country-by-country regime on both scores.
See also Chris William Sanchirico, Should a Global Minimum Tax be Country-by-Country?, Tax Notes Federal, Vol. 175, pp. 549-558 (April 25, 2022).
Keywords: Global minimum tax, country-by-country, Global Anti-Base Erosion Rules, GloBE, Pillar Two, Global Intangible Low-Taxed Income, GILTI, GILTI High-tax Exception, GILTI HTE, Base erosion, Global tax reform
JEL Classification: K34, H25, H26, C72
Suggested Citation: Suggested Citation