Adam Kern (San Diego; Google Scholar) presents The Hole in the Global Minimum Tax at Missouri today as part of its Tax Policy Colloquium hosted by David Gamage:

This Article shows that the global minimum tax might make tax competition more intense. While the global minimum tax restricts competition for profit, it amplifies competition for investment. This Article provides the first analysis of that trade-off, suggesting surprising reforms to the global minimum tax and illuminating broader issues in tax policy and legal theory.

Conclusion
The global minimum tax is an ambitious effort to regulate international tax competition. Most tax scholars acknowledge that its carve-out for routine profit limits what it can achieve. Yet they remain optimistic: They believe that the global minimum tax will meaningfully restrict profit-shifting while leaving competition for investment, at worst, unaffected. On this view, even an imperfect reform represents progress.

This Article has shown why that intuition is mistaken. The global minimum tax does not simply make partial progress on two separate problems. Instead, it raises a trade-off between them. By restricting profit-shifting while permitting competition for investment, the global minimum tax strengthens firms’ incentives to invest in low-tax jurisdictions and countries’ incentives to attract investment through tax cuts.

To set the optimal policy path, we need to conduct further research. We need to estimate the relative magnitude of excess profit and immobile profit. We also need to better understand which reforms are politically feasible within the complex landscape of international tax cooperation. This Article has developed a framework within which those efforts can be made. And it has raised new questions that must be answered as we try to construct a brighter economic future.

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