The Global Minimum Tax and the Future of International Taxation

Over 140 countries have agreed to the introduction of a Global Minimum Tax (GMT), widely regarded as the most significant reform of the international business tax system in a century. While acknowledging that the agreement constitutes a remarkable political and technical achievement, this article questions whether the hype over the reform is justified and reflects on its likely impact on the future of international business taxation. The article makes three principal contributions. First, it argues that the GMT’s impact on the existing system is mixed. Critically, the system continues to perform poorly overall. Second, it argues that this mixed impact is caused by the policy, not its implementation. Propping up the existing origin-based system with a GMT is a poor policy choice because the destabilising forces generated by the system’s incentive incompatibility persist. These forces undermine the reform and continue to undermine the system overall. Third, it argues that by doubling down on the existing origin-based system, the GMT makes it more difficult to pursue promising reform options that depart fundamentally from this system. This is troubling given the article’s conclusion that the system continues to perform poorly overall, even in the wake of the GMT.

Over 140 countries have agreed to the introduction of a Global Minimum Tax (GMT), widely regarded as the most significant reform of the international business tax system in a century. While acknowledging that the agreement constitutes a remarkable political and technical achievement, this article questions whether the hype over the reform is justified and reflects on its likely impact on the future of international business taxation. The article makes three principal contributions. First, it argues that the GMT’s impact on the existing system is mixed. Critically, the system continues to perform poorly overall. Second, it argues that this mixed impact is caused by the policy, not its implementation. Propping up the existing origin-based system with a GMT is a poor policy choice because the destabilising forces generated by the system’s incentive incompatibility persist. These forces undermine the reform and continue to undermine the system overall. Third, it argues that by doubling down on the existing origin-based system, the GMT makes it more difficult to pursue promising reform options that depart fundamentally from this system. This is troubling given the article’s conclusion that the system continues to perform poorly overall, even in the wake of the GMT.