Originally published: May 2024
It may surprise you that some US MNEs still think that OECD’s global minimum tax (Pillar 2, P2) will not really become reality. But apparently, there are still enough P2 skeptics that Bloomberg thought it merited an article (https://lnkd.in/ebGq48kT).
Of course, IIR and QDMTT has entered into force in a several dozens of jurisdictions, but these P2 skeptics will just restructure their holding structure to ensure no problem cases are held by an IIR country (although, if they only do that restructuring now, they are likely too late).
And then, come 2025, the assumption is that UTPR will not apply? The idea here is that the US will retaliate to all UTPR countries. As Biden has supported the Two Pillars, this retaliation can only happen if Trump wins the election in November 2024. The retaliation will need to be so swift and so total that all UTPR countries will fold and will do so in a matter of months (with some retroactive effect too, as legislation and EU directives can’t realistically be repealed before December 2024).
Some of you may remember that the UTPR safe harbour means that UTPR will not target US profits of US MNEs in 2025, but UTPR can apply in 2025 to non-US profits of US MNEs (eg profits reported in zero tax jurisdictions, where even a double tax treaty based challenge to UTPR is unlikely to apply). So P2 skeptics also assume that a new Trump administration is willing to immediately seek confrontation with almost all of their allies to protect the low tax outcomes on offshore profits of US MNEs.
I guess it’s not wholly impossible. But it reads more like someone’s wishful thinking turned tax policy fan fiction than a realistic scenario.
Obvious disclaimers: this is not advice. These views are my own and do not necessarily represent my employer.
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