Thursday, January 26, 2023
Christians and Shay: The consistency of the Pillar 2 UTPR with US bilateral tax treaties.
Allison Christians (McGill; Academic google) and Stephen E. Shay (Boston College; Academic google), The consistency of the Pillar 2 UTPR with US bilateral tax treaties.178 Fed. Tax Notes 499 (January 23, 2023):
In this report, Christians and Shay explain why the Pillar 2 rule on taxable gains would be consistent with US bilateral income tax treaties and explore some of the reasons behind claims that the UTPR It is incompatible with those treaties.
The UTPR is not an income tax, nor is it likely to be characterized as in lieu of an income tax. Instead, it is a cash tax expense that can be collected in any way and is most likely in the nature of an excise tax. Contrary to the claims of Republican lawmakers and other commentators, the best view is that UTPR is not covered at all by existing tax treaties, so it cannot be said to conflict with their terms.
Given its role in supporting the coordinated efforts of Pillar 2 countries to ensure that in-scope multinational groups pay a minimum ETR of 15 percent in all jurisdictions, it is possible, even likely, that after a transition period , countries collect little. if any UTPR. As a result, the US priority should be to work cooperatively with other members of the inclusive framework to resolve coordination issues with non-converging US tax rules as adoption of Pillar 2 rules progresses across jurisdictions.
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