Tax Incentives and the Global Minimum Tax

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Type and Duration

FFF-Förderprojekt, June 2023 until December 2023 (finished)

Coordinator

Business Management Taxation & Tax Law

Main Research

Business Law

Description

Many jurisdictions grant tax incentives providing tax relief to particular industries or activities in pursuit of a variety of goals. Soon, such domestic measures will coincide with the OECD/G20 framework on global minimum taxation of multinational enterprise groups (GloBE), which has been agreed upon by more than 135 jurisdictions worldwide. The agreement stipulates a mini-mum tax rate of 15%, provided that the effective tax level in a jurisdiction where the corporate group is active falls below this threshold. Whenever tax incentives push the effective tax burden below this threshold or exacerbate pre-existing low levels of taxation, the GloBE Rules will apply. These, however, do not provide for a homogenous treatment of all types of tax incentives when calculating the amount of jurisdictional Top-up Tax due. Instead, they will impact different tax incentives in different ways, with the extent of this effect largely depending on the design of the stimulus. The fact that some variants of tax incentives are less susceptible to Top-up Taxation under GloBE provides considerable leeway for fiscal policy action. We aim to explore this fiscal headroom by analysing the implications of GloBE on tax incentive design. Based on a presentation of the critical aspects of GloBE with regard to the treatment of tax incentives under this set of rules, we intend to model the impact of GloBE on the effectiveness of various tax incentives using a quasi-empirical Effective Average Tax Rate (EATR) methodology.In doing so, we refer to specific examples of tax incentives subject to current reform endeavours in several jurisdictions against the background of the "new normal" baseline MNE tax rate of 15%.

Principal Investigator

Prof. Dr. Martin Wenz

Project Collaborators

Niklas Kaiser

Kasem Zotkaj, MSc