International Tax Competition and the Impact of a Global Minimum Tax

The recent agreement on a global minimum tax and other changes to tax rules worldwide have called into question the future of tax competition. Each year, The Tax Foundation puts out its International Tax Competitiveness Index. The Index measures the extent to which a country’s tax system adheres to key aspects of tax policy. Among so many changes and the global minimum agreement, is the annual index still relevant today? 

International tax policy is heating up in the wake of the OECD’s global minimum tax agreement. Listen to Kelly and Daniel Bunn tease out the details of tax competitiveness and the global tax agreement in plain English.

On today’s episode of the Taxgirl podcast, Kelly is joined by Daniel Bunn to discuss the relevance and nuance of the International Tax Competitiveness Index. Daniel is the VP of Global Projects at The Tax Foundation, where he researches international tax issues with a focus on tax policy in Europe. Before joining The Tax Foundation, he worked in the US Senate on the Joint Economic Committee as part of Senator Mike Lee’s social capital project. He was also on the policy staff for both Senator Lee and Senator Tim Scott. During his time with the Senate, Daniel developed legislative initiatives on tax, trade, regulatory, and budget policy.

Listen to Kelly and Daniel talk about the OECD and the Tax Competitiveness Index:

• Daniel recently wrote an article (linked below) on whether the Index and “competitiveness” models will matter in years to come as the OECD deal moves forward. What is a quick synopsis of the status of the OECD deal?
• How does a tax rate factor into tax competition? Daniel explains the nuances of tax rates and how the Tax Foundation generally views them as a means to fund various public programs, which can affect tax competitiveness in many ways. 
• One word that comes up a lot in discussions of tax policy is “distortion.” Daniel explains what distortions are in tax policy and how they factor into the bigger picture of the global tax landscape.
• When talking about the global tax agreement, Daniel says a lot of the implementation over the next few years will come down to behavior changes on both the company side and the government side. 
• A big sticking point in international discussions with the OECD was the digital services tax, and how different countries and governments will shift as a result of doing away with the digital services tax long term. How does Daniel anticipate governments may react as a result?
• One interesting premise of the deal is that everyone has to cooperate for it to work as intended. So far, a majority of countries (at least 137) have signed onto the agreement. Is Daniel concerned by lingering resistance down the road?
• Is there any fear that all the agreements carefully laid today could be undone by future elections? Daniel unpacks the roles that diplomacy and politics play in the OECD as well as in compiling the Tax Competitiveness Index.
• For someone who’s never seen the annual index before, Kelly says she would expect people to assume the larger global powerhouses to be at the top of the tax competitiveness rankings. However, that’s not always the case. Daniel explains why this happens and how some smaller countries land near the top of the list.
• In general, the index seems to reward simplicity in tax policy over complexity, which is likely why the US ranks lower than many others. What are Daniel’s thoughts on the US’s ranking, and what are the factors that contributed to its place in the index?
• How does remote work tie into tax competitiveness? In Daniel’s tax writing, he discusses how some smaller, high-ranking countries, like Estonia and Latvia, are trying to “woo” remote workers with their tax policies. 
• Kelly says one of her favorite pieces of the index is reading the fine print on why a country has moved up or down since the previous report. What are Daniel’s top countries to watch for movement on the rankings in the near future?

More about Kelly:

Kelly is the creator and host of the Taxgirl podcast series. Kelly is a practicing tax attorney with considerable experience and knowledge. She works with taxpayers like you every day. One of the things she does is help folks out of tax jams and, hopefully, keep others from getting into them.

You can find out more about Kelly here, and you can follow her on Twitter, Facebook, Instagram, and LinkedIn.

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Links:

Kelly’s Website – Taxgirl
Daniel’s LinkedIn — Daniel Bunn
Daniel’s Twitter — @danieldbunn
Daniel’s Articles — Tax Foundation