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

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  • Navarro Aitor

    (Carlos III University, Madrid Getafe, Madrid, Spain.)

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.

Suggested Citation

  • Navarro Aitor, 2021. "Jurisdiction Not to Tax, Tax Sparing Clauses, and the OECD Minimum Taxation (GloBE) Proposal," Nordic Tax Journal, Sciendo, vol. 2021(1), pages 6-19, October.
    • Handle: RePEc:vrs:notajo:v:2021:y:2021:i:1:p:6-19:n:3
    DOI: 10.2478/ntaxj-2021-0004
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    References listed on IDEAS

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    3. James R. Hines Jr., 2000. "Tax Sparing and Direct Investment in Developing Countries," NBER Chapters, in: International Taxation and Multinational Activity, pages 39-72, National Bureau of Economic Research, Inc.
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