INTRODUCTION Contributed by: Devon M. Bodoh, Joseph M. Pari and Blake D. Bitter, Weil, Gotshal & Manges LLP
Weil, Gotshal & Manges LLP 2001 M Street, NW Suite 600 Washington, DC 20036 USA
Tel: +1 202 682 7060 Fax: +1 202 857 0940 Email: devon.bodoh@weil.com Web: www.weil.com
Resurgence of tax sovereignty A key theme in President Donald Trump’s executive order withdrawing the USA from the global tax deal with the OECD was tax sovereignty – not wanting to have US tax rules being dictated by extraterritorial bodies or governments, particularly if the USA saw those rules as being discriminatory or unfair from a US perspective. This perspective involves looking not only at whether such rules are written generically, but also whether they are substantively designed to tar - get primarily US enterprises (and their local subsidiar - ies). Tax sovereignty was always going to be an issue with the USA in any global tax deal, especially with the US separation of governmental powers and roles between US negotiators (in the executive branch) of a tax deal and the legislators (ie, Congress) and the dif - ficulties of passing most legislation through Congress. However, Donald Trump’s election certainly foreclosed the already slim chance of tax legislation in the USA being brought into line with Pillar Two, intensified this tax sovereignty theme and focused the USA on pro - tecting its multinational enterprises from the increas - ing implementation of Pillar Two. Tax sovereignty is not isolated to the USA with respect to Pillar Two but is also evident in other jurisdictions’ reaction to the Side-by-Side Package from the OECD and related US requests (eg, a push-down of the global minimum tax that the USA imposes on non- US subsidiaries, thus potentially reducing the local domestic minimum tax that can be collected by that subsidiary’s tax jurisdiction). This is a natural reac - tion to the Side-by-Side Package and part of the risk that the Side-by-Side Package erodes the overall implementation of Pillar Two and other coordinated
Corporate Taxation: Navigating Tax Uncertainty in a Changing Global Landscape Over the past year, the global tax landscape has been full of volatile and dramatic shifts. These shifts include the abrupt withdrawal of the USA from all agreements with the OECD regarding Pillar One and Pillar Two, the threat of retaliatory taxes (whether by tariffs, tax rates and other changes), the agreement between the USA and the remaining Group of Seven coun - tries for a side-by-side exception for US multinational groups from some of the more significant portions of Pillar Two and, most recently, the OECD’s issuance of a side-by-side package (the OECD Side-by-Side Package) that adopts such a side-by-side exception (the Side-by-Side Safe Harbor) for US multinational groups. While arguably the issuance of the OECD Side-by-Side Package provides some increased sta - bility – at least in the short term with respect to the prospect of US retaliatory taxes – its implementation, effect, and longevity are all continued areas of uncer - tainty and concern. Despite this uncertainty, there is also a remarkable amount of stability in certain tax systems. For exam - ple, despite all the changes that have occurred, and that still will occur, the basic principles and rules of corporate taxation in many jurisdictions have large - ly remained unchanged. This is due in large part to the fact that the underlying challenges, concerns, and motivations of jurisdictions in dealing with taxation remain broadly the same (even if the spe - cific approaches taken by jurisdictions differ). A few themes regarding this turbulent time in global tax are discussed below.
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