So Close and Yet So Far: The Ability of the Global Minimum Tax to Mitigate Harmful Corporate Tax Competition

ABSTRACT The corporate minimum tax agreement, the second pillar of a two-pillar solution adopted by a multitude of countries to address certain tax challenges sets a goal of having multinational enterprises pay a minimum tax rate of 15 percent on their global income in an attempt to stop harmful tax competition and stem the race to the bottom on corporate tax rates. Many of the major trading partners of the United States have adopted or announced plans to adopt the tax agreement. The United States and G-7 Nations recently announced plans for a side-by-side agreement that brings the United States within the intent of the minimum tax agreement. We examine the minimum tax agreement and evaluate it against recognized principles of good tax policy. We conclude that even though it may not end tax competition, it sets a floor that would be difficult to abuse.