What Is the Substance-Based Carve-Out under Pillar 2? And How Will It Affect Tax Competition?

Michael Devereux, Martin Simmler, John Vella and Heydon Wardell-Burrus

No 39, EconPol Policy Brief from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: Key messages: The success of the recently agreed international tax reform hinges on a technical issue in the design of the Pillar 2 global minimum tax Pillar 2 ensures the minimum taxation of ‘residual’ (e.g. non-routine) profts at 15%. ‘Routine’ proft is not subject to Pillar 2. The effects depend on which of two possible options is used: Option 1 removes the incentive to compete below a liability of 15% of residual profts and puts a floor to tax competition Option 2 still maintains an incentive for governments to compete by reducing their taxes – possibly all the way to zero. Consequences for tax competition depend on the technical details to be revealed. Announcement containing more details of the proposal are expected shortly.

Date: 2021
New Economics Papers: this item is included in nep-pbe and nep-pub
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.ifo.de/DocDL/EconPol_Policy_Brief_39_Pillar2.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:econpb:_39

Access Statistics for this paper

More papers in EconPol Policy Brief from ifo Institute - Leibniz Institute for Economic Research at the University of Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().