Should a Global Minimum Tax be Country-by-Country?
12 Pages Posted: 25 May 2022
Date Written: March 25, 2022
The OECD has proposed implementing a global minimum tax, and the US already has in place one version of such a regime in the form of GILTI. A key design choice in the imposition of a global minimum tax is whether the minimum should be tested on a country-by-country basis or on the basis of an MNE's global average tax rate. The consensus view appears to be that a country-by-country approach is superior because, first, it raises more revenue and, second, it is more effecting at controlling harmful tax competition. This paper challenges those assertions. It presents a simple game-theoretic analysis suggesting that a global averaging approach is superior in both respects.
See also Sanchirico, Chris William, A Game-theoretic Analysis of Global Minimum Tax Design: Country-by-Country v. Global Averaging (March 25, 2022). U of Penn, Inst for Law & Econ Research Paper No. 22-19, Available at SSRN: https://ssrn.com/abstract=4066747 or http://dx.doi.org/10.2139/ssrn.4066747
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