Mary Healy is senior representations manager and Lorraine Sheegar is tax manager at Irish Tax Institute

OECD rules

At the end of last year, the OECD published the pillar two global anti-base erosion (Globe) model rules. These provide a co-ordinated system to ensure that multinational enterprises with annual revenues over €750m pay a minimum effective tax rate on the income arising in each jurisdiction in which they operate.

In mid-March, the OECD released a commentary to the Globe rules to provide multinationals and tax administrations with detailed and comprehensive technical guidance on the operation and intended outcomes and to clarify the meaning of certain terms. The intention is to promote a consistent and common interpretation of the Globe rules. The OECD also published a document that includes examples illustrating the application of the rules.

The next step in the OECD’s work on the Globe rules is to develop the implementation framework, outlined last October. This will facilitate the coordinated implementation and administration of the rules, and provide agreed administrative procedures, including filing obligations and multilateral review processes.

The rules are designed to ensure multinationals pay a minimum effective tax rate

The development of safe harbours to support compliance and tax administration will also be considered. To help inform the development of the implementation framework, a public consultation was launched, which closed in mid-April.

Last December, the EU published a proposed directive to implement the Globe rules into EU law and invited stakeholder feedback. Since January, the EU’s working party on tax questions, which deals with legislative proposals in relation to tax, have held meetings focused on the technical examination of the proposed directive. The issues of a political nature identified have been discussed at the Economic and Financial Affairs Council (Ecofin). Although EU member states have made progress on the directive, they were unable to reach agreement on the compromise text at either the March or April Ecofin meetings.

US Budget

At the end of March, US President Joe Biden announced his Budget for the fiscal year 2023. The Budget included a number of key tax proposals, including:

  • a new ‘billionaire tax’ – a 20% minimum tax on total income (generally including unrealised capital gains) for taxpayers with wealth greater than US$100m
  • an increase in the top marginal income tax rate to 39.6% for high earners
  • an increase in the corporate income tax rate from 21% to 28%. This would consequently increase the global intangible low-taxed income (Gilti) rate in tandem. The proposal is scored under the assumption of a Build Back Better Act baseline. Therefore, the new Gilti effective rate would be 20%, applied on a jurisdiction-by-jurisdiction basis
  • repeal of the base-erosion and anti-abuse tax (Beat) and its replacement with an undertaxed profits rule (UTPR) that is consistent with the UTPR described in the Globe model rules. The UTPR would apply only to financial reporting groups that have global annual revenue of US$850m or more in at least two of the prior four years. In addition, a US domestic minimum top-up tax would form part of the rules to protect US revenues from the imposition of UTPR by other countries.

The US Treasury has released its Green Book for the Biden administration’s fiscal year 2023 revenue proposals, providing general explanations and detailed revenue estimates. A White House fact sheet on the announcement has also been published. The outcome of the president’s Budget is uncertain as it remains to be seen whether the measures will progress through Congress.

While every effort has been made to ensure the accuracy of this information, no responsibility for loss or distress occasioned to any person acting or refraining from acting as a result of the material contained herein can be accepted by the Irish Tax Institute, authors, contributors or publishers. Professional advice should always be sought for your particular circumstances before acting on any tax issue.