Brendan Bargmann (Cal-Western), Ending the Vicious Cycle: Understanding 'Pillar Two' and the Uncertain Progress Towards a Harmonized Global Minimum Tax, 64 Va. J. Int’l L. Online 1 (2023):

The modern globalized financial order presents states with a trilemma of balancing (1) FDI-driven job creation and economic growth, (2) economic openness and competition from peers, and (3) securing a social safety net. While there has long been a theoretical understanding of the solution – global tax harmonization around the so-called “single tax principle” – implementation has long proven difficult.

However, the OCED was, in recent years, able to create a framework agreement to place multilaterally agreed limits on tax competition, as manifested in their ‘OECD/G20 Inclusive Framework On BEPS’, to which 135 countries are committed. The key component to this reform is so-called “Pillar Two,” an agreement that when a multinational enterprise’s effective tax rate in a jurisdiction drops below fifteen percent, the entity would potentially be subject to “top-up” tax liability, thereby discouraging the use of damaging tax incentive policy. However, the OECD framework is a nonbinding technical agreement; implementation has been varied and remains technically and politically challenging.

This paper examines the underlying issue which necessitates the policy, applies a theoretical framework for understanding reform, explores the policy of the “Pillar Two” framework, and analyzes the framework’s implementation and real-world effects.

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