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72: International Tax Competition & the Impact of a Global Minimum Tax
Episode 7223rd November 2021 • Taxgirl Podcast • Kelly Phillips Erb
00:00:00 00:34:18

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The recent agreement on a global minimum tax, and other changes to tax rules around the world, have called into question the future of tax competition. Each year, The Tax Foundation puts out their International Tax Competitiveness Index. The Index seeks to measure the extent to which a countries’ tax system adheres to important aspects of tax policy. Among so many changes and the global minimum agreement, is the annual index still relevant today? 

International tax policy is heating up in the wake of the OECD’s global minimum tax agreement. Listen to Kelly and Daniel Bunn tease out the details of tax competitiveness and the global tax agreement in plain English.

On today’s episode of the Taxgirl podcast, Kelly is joined by Daniel Bunn to discuss the relevance and nuance of the International Tax Competitiveness Index. Daniel is the VP of Global Projects at The Tax Foundation, where he researches international tax issues with a focus on tax policy in Europe. Prior to joining The Tax Foundation, he worked in the US Senate at the Joint Economic Committee as part of Senator Mike Lee’s social capital project. He was also on the policy staff for both Senator Lee and Senator Tim Scott. During his time with the Senate, Daniel developed legislative initiatives on tax, trade, regulatory, and budget policy.

Listen to Kelly and Daniel talk about the OECD and the Tax Competitiveness Index:

  • Daniel recently penned an article (linked below) about whether or not the Index and “competitiveness” models will matter in years to come as the OECD deal moves forward. What is a quick synopsis on today’s status on the OECD deal?
  • How does a tax rate factor into tax competition? Daniel explains the nuances surrounding tax rates, and how The Tax Foundation generally considers them as a means to fund various public programs, which can affect tax competitiveness in many different ways. 
  • One word that comes up a lot in discussions of tax policy is “distortion.” Daniel explains what distortions are in the realm of tax policy, and how they factor in to the big picture of the global tax landscape.
  • When talking about the global tax agreement, Daniel says a lot of the implementation over the next few years will come down to behavior changes on both the company side and the government side. 
  • A big sticking point during international discussions pertaining to the OECD was the digital services tax, and how different countries and governments will shift as a result of doing away with the digital services tax long term. How does Daniel anticipate governments may react as a result?
  • One of the interesting premises of the deal is that everyone has to cooperate in order for it to work as intended. So far, a majority of countries (more than 130) have signed on in agreement, but not yet all of them. Is Daniel concerned by lingering resistance down the road?
  • Is there any fear that all the agreements carefully laid today could be undone by future elections? Daniel unpacks the roles that diplomacy and politics play in the OECD as well as in compiling the Tax Competitiveness Index.
  • For someone who’s never seen the annual index before, Kelly says she would expect people to assume the larger global powerhouses to be at the top of the tax competitiveness rankings. However, this is certainly not always the case. Daniel explains why this happens and how some of the smaller countries get placed toward the top of the list.
  • In general, it seems the index rewards simplicity in tax policy in favor of high complexity, which is likely why the US is ranked lower than many others. What are Daniel’s thoughts on the US’s ranking and what are the factors that contributed to its place in the index?
  • How does remote work tie into tax competitiveness? In Daniel’s tax writing he discusses how some of the smaller high-ranking countries, like Estonia and Latvia, are trying to “woo” remote workers with their tax policies. 
  • Kelly says one of her favorite pieces of the index is reading the fine print on why a country has moved up or down since the previous report. What are Daniel’s top countries to watch for movement on the rankings in the near future?

More about Kelly:

Kelly is the creator and host of the Taxgirl podcast series. Kelly is a practicing tax attorney with considerable experience and knowledge. She works with taxpayers like you every day. One of the things that she does is help folks out of tax jams, and hopefully, keep others from getting into them.

You can find out more about Kelly here and you can follow her on Twitter, Facebook, Instagram, and Linkedin.

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Kelly’s Website – Taxgirl

Daniel’s LinkedIn -- Daniel Bunn

Daniel’s Twitter -- @danieldbunn

Daniel’s Articles -- Tax Foundation