Cross-border Tax Talks

Back to School: Mindy Herzfeld’s Pillar 2 insights

Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Mindy Herzfeld, professor of tax practice at the University of Florida Levin College of Law, where she teaches International Tax; contributing editor to Tax Notes International; and author of the 12th edition of International Taxation in a Nutshell. She joins the podcast this week in an educational capacity to discuss Pillar Two rules, specifically, the Pillar Two ordering rules, Qualified Domestic Minimum Top-up Taxes (QDMTTs), and whether GILTI is a qualifying IIR or CFC regime.

Timestamps:

• 1:55 - How did Mindy end up in academia?
• 4:30 - What is Mindy’s view on whether or not Pillar Two will happen and its potential timing?
• 10:40 - Generally what are the Pillar Two ordering rules when taxpayers are computing their potential Pillar Two liabilities and how might GILTI fit in for US MNCs?
• 17:10 - Is GILTI a qualifying IIR in its current form?
• 20:10 - Assuming for argument's sake that GILTI is NOT a qualifying IIR, is GILTI a qualifying CFC regime? If so, then could the taxes that are paid in the US on GILTI get pushed down to the covered taxes of the subsidiaries held below the US?
• 22:10 - Hypothetically, what if GILTI is neither an IIR nor a CFC regime?
• 23:30 - How have the original policy goals been eroded by these ordering rules?
• 24:45 - How does the QDMTT fit within the broader policy goals to achieve a domestic minimum tax?
• 27:00 - Is it inevitable that most countries will ultimately adopt a QDMTT?
• 28:30 - Could the QDMTT be the first piece of bipartisan tax legislation?
• 31:40 - There are a number of complexities with the QDMTT, one of which is how these taxes are allocated amongst constituent entities in the same jurisdiction. Why is that important, and can you provide an example?
• 35:45 -Domestic tax incentives could push many US based MNCs into less than a 15% GLoBE rate in the US, thereby subjecting them to a top up tax under Pillar Two. The Greenbook suggests this will be fixed. How could the US address this?
• 38:30 - Is this going to end up being a massive compliance exercise for multinationals to compute this GLoBE income?
• 41:30 - Mindy posited that the Biden tax proposals, the OECD Pillar two project, and the Russian sanctions all have something in common. How could Pillar Two be used to address these issues with individuals from a tax perspective?

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