Jurisdiction not to Tax, Tax Sparing Clauses, and the Income Inclusion Rule of the OECD Pillar 2 (GloBE) Proposal Articles uri icon



publication date

  • October 2021

start page

  • 6

end page

  • 19


  • 1


  • 2021

International Standard Serial Number (ISSN)

  • 2246-1809


  • The OECD Programme of Work on the tax challenges arising from the digitalization of the economy comprises a so-called GloBE (Global Base Erosion) or Pillar Two proposal, consisting of a series of measures aimed atestablishing a floor to tax competition by achieving minimum taxation of the income obtained by in-scope multinational enterprises. If such a measure is implemented, developing countries would be severely deprived of the possibility to grant tax incentives to attract FDI and potentially foster economic growth. This contribution emphasizes the importance of the thorough review of their taxpolicy preferences that developing countries should undertake amidst the rapid adoption of GloBE, which theOECD is pushing to achieve. To illustrate this concern, anexamination of implementation issues shows that a deficient enactment of the income inclusion rule proposed inGloBE could paradoxically trigger the applicability of taxsparing clauses aimed at protecting the effectiveness of taxincentives, even when both sets of rules pursue opposing goals


  • Law


  • jurisdiction to tax; tax sparing; tax incentives; pillar two; globe; tax treaties