Constructive Dialogue : BEPS and the TCJA.

Résumé du livre

As developed by the OECD, BEPS 2 has two pillars. Pillar 1 is the extension of BEPS 1 action 1, dealing with the digital economy. It is still in process but what has been revealed so far envisages far-reaching changes to the international tax regime, primarily by partially abandoning the arm's length principle (ALP) and the permanent establishment threshold (PE). Neither of these changes is driven by the United States, and it remains to be seen whether they will succeed in averting the widespread adoption of digital services taxes (DSTs) intended to impose some tax burden on U.S. MNEs. Pillar 2, on the other hand, is a direct extension of the TCJA. The GLOBE proposal builds on GILTI and BEAT in implementing the single tax principle by (a) requiring residence taxation at a minimum rate if the source country does not impose tax and (b) denying deductions at source if the residence country does not tax. Both Pillar 2 proposals represent an improvement over the TCJA. The residence-based proposal is an improvement over GILTI if it denies cross crediting, which fosters tax competition. The source-based proposal is an improvement over BEAT because it explicitly links the denial of deductions to whether the income is taxed at residence, which the BEAT does not do. The precise details still need to be worked out. Thus, the current state of affairs can be characterized as a constructive dialogue: The OECD moves (BEPS 1), the United States responds (TCJA), the OECD moves again (BEPS 2). Hopefully, BEPS 2 will succeed, and the United States will then go along and amend the TCJA as well as adopt the changes envisaged in pillar 1. From this kind of dialectic, a new international tax regime fit for the 21st century may emerge.