Under the global minimum tax impact on US tax systems, discuss how could the implementation of pillar-2 in general limit the government’s abilities to control its own tax policy.

The Research Paper Proposal

The Implications of a Global Minimum Tax on The U.S. Tax Policy

1. Introduction
2. Overview of global minimum tax pillars.
3. The threat of pillar-2 to the U.S. tax base.
A) Pillar-2 threaten corporate revenue.
B) The threat of Influence the local tax policy.
4. Economic effects of Pillar two.
5. Pillar-2 and GILTI.
6. Pillar-2 and Tax incentives.
7. Conclusion.
1. Under the global minimum tax impact on US tax systems, discuss how could the implementation of pillar-2 in general limit the government’s abilities to control its own tax policy. For instance, the tax policy makers will not have full authority or freedom to implement tax incentives to attract foreign investors. This because they will be bounded by the 15%, the global minimum tax rate. This may have negative effects on inbound money-flow.

Another issue consider here is the US jurisdiction dominancy on its own corporations. Most of the multinational companies which will be subject to this type of tax are American companies, accordingly, taxes applied by EU and other countries on these enterprises would cause interference in the U.S. sovereignty over American corporation, limiting the US government’s power to impose tax policies on its own citizens.

2. The economic effects. consider two contradictory theories or arguments about the estimated consequences of adapting pillar-2 either abroad or in the United States, on the American economy.
First, address the theory of those who believe that the application of the principle of the minimum global corporate tax will enforce the targeted companies to pay more taxes and thus increase the cash-flow to the state’s treasury. Further, I will bring the support argument which sees the implementation of this type of tax will act as a great mechanism to reduce the outbound migration of corporation and encourage inbound profit-shifting. This, in their opinion, would provide more jobs opportunities at home, and create a prosperous economy.

In contrast, examine the contrasting argument that the implementation of the pillar-2 abroad would raise taxes on US capital overseas. In other words, the American shareholders would pay tax of at least 15% in the foreign jurisdiction, and they will be eligible for foreign tax credit deduction in the United States. This will lead to reducing the flow of funds to the US treasury. Nevertheless, any attempts by the US tax policy makers to modify the tax incentives, such as, eliminating or adjusting the foreign tax credit deduction, GILTI, or any other incentive, would be a very critical move. Because, it might have a negative impact on revenue flow.