A Game-theoretic Analysis of Global Minimum Tax Design: Country-by-Country v. Global Averaging

31 Pages Posted: 27 Mar 2022 Last revised: 23 May 2022

See all articles by Chris William Sanchirico

Chris William Sanchirico

University of Pennsylvania Carey Law School; University of Pennsylvania Wharton School - Business Economics and Public Policy Department

Date Written: March 25, 2022

Abstract

This paper constructs and analyzes a rudimentary game-theoretic model to better understand the policy choice between a global minimum tax regime that operates country-by-country and one that operates based on MNEs’ global average tax rates. The paper’s findings run counter to the consensus view. That view favors a country-by-country regime for two kinds of reasons: it collects more tax liability from MNEs; and it is more effective in preventing harmful tax competition among taxing jurisdictions. The model in this paper suggests that a global average regime is superior to a country-by-country regime on both scores.

See also Chris William Sanchirico, Should a Global Minimum Tax be Country-by-Country?, Tax Notes Federal, Vol. 175, pp. 549-558 (April 25, 2022).

Keywords: Global minimum tax, country-by-country, Global Anti-Base Erosion Rules, GloBE, Pillar Two, Global Intangible Low-Taxed Income, GILTI, GILTI High-tax Exception, GILTI HTE, Base erosion, Global tax reform

JEL Classification: K34, H25, H26, C72

Suggested Citation

Sanchirico, Chris William, A Game-theoretic Analysis of Global Minimum Tax Design: Country-by-Country v. Global Averaging (March 25, 2022). U of Penn, Inst for Law & Econ Research Paper No. 22-19, Available at SSRN: https://ssrn.com/abstract=4066747 or http://dx.doi.org/10.2139/ssrn.4066747

Chris William Sanchirico (Contact Author)

University of Pennsylvania Carey Law School ( email )

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HOME PAGE: http://www.law.upenn.edu/faculty/csanchir/

University of Pennsylvania Wharton School - Business Economics and Public Policy Department

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