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View this email in your browser <https://mailchi.mp/law/perspective-302?e=763bcf158c> 哥伦比亚大学国际直接投资展望中文版都可以在我们的网站查看： http://ccsi.columbia.edu/publications/columbia-fdi-perspectives. <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=362f20bf5f&e=763bcf158c> *Columbia FDI Perspectives* Perspectives on topical foreign direct investment issues No. 302 April 19, 2021 Editor-in-Chief: Karl P. Sauvant ([log in to unmask]) Managing Editor: Riccardo Loschi ([log in to unmask]) *International tax reform and FDI* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=f03d176d64&e=763bcf158c> * <#m_-8846988259725305171__edn1> by Pierce O’Reilly ** <#m_-8846988259725305171__edn2> PMNEs are a key feature of today’s globalized economy. In recent years, the issue of MNE tax avoidance, also known as Base Erosion and Profit-Shifting (BEPS), has been high on the international policy agenda. In 2015, the OECD estimated that BEPS cost countries US$100-240 billion annually, or about 4-10% of total global corporate income tax revenues.[1] <#m_-8846988259725305171__edn3> The digitalization of the economy has exacerbated BEPS risks by allowing MNEs to locate more easily some of their profits in jurisdictions where they have little or no real activity. In addition, digitalization has also enabled companies—and not only tech companies—to derive an increasing share of their profits from markets where they have no physical premises and no employees. There is now widespread agreement amongst countries and academics that the current international tax rules, developed in 1923, must be adapted to the current economy, ensuring that all businesses pay tax where they have activities and earn their profits, including where digital businesses participate in the economy of a country without physical presence. International corporate taxation and BEPS activity are important drivers of FDI across countries. Both domestic corporate tax rates and international tax frameworks (e.g., tax treaties)[2] <#m_-8846988259725305171__edn4> can substantially impact FDI. The literature also suggests that substantial FDI-shares is pass-through investment,[3] <#m_-8846988259725305171__edn5> evidencing tax planning structures. With the support of the G20, the OECD has brought together more than 135 jurisdictions within the G20/OECD Inclusive Framework on BEPS to work on overhauling the international tax rules facing MNEs. A 15-point Action Plan was developed and enacted between 2012 and 2015 to address BEPS, and global implementation has been underway ever since.[4] <#m_-8846988259725305171__edn6> In light of increasing public pressure around profit-shifting, in 2017 the G20 mandated the OECD to renew multilateral discussions within the Inclusive Framework to address the tax challenges of digitalization. Countries are now actively negotiating a consensus-based solution to address these tax challenges by the end of 2020. The ongoing work is built around a two-pillar approach and involves multiple public consultations with stakeholders, including businesses, academia and civil society. Pillar One aims at expanding the taxing rights of market jurisdictions (which, for some business models, is the jurisdiction where the user of a digital service is located) over certain defined business activities in exchange for improved tax certainty and removal of certain unilateral measure such as digital services taxes. Pillar Two (also referred as the Global Anti-Base Erosion or “GLoBE” proposal) focuses on the remaining BEPS risks and seeks to entitle jurisdictions to “tax back” where other jurisdictions have not exercised their primary taxing rights or the payment is otherwise subject to low levels of effective taxation. While many details remain the subject of ongoing negotiations, the OECD secretariat has presented a preliminary economic analysis <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=3aace8e801&e=763bcf158c> illustrating—through some stylized scenarios—how the proposals could change tax revenues and investment levels. In October 2020, the Inclusive Framework released detailed Blueprint reports for Pillar One <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=3ef46aaed1&e=763bcf158c> and Two <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=5cab1a7420&e=763bcf158c> . Many caveats characterize this kind of economic analyses, which rely on assumptions concerning many parameters of the reforms that have yet to be decided at a political level. In addition, the modelling relies on assumptions about countries and firms’ behavioral responses, which are subject to significant uncertainty. The results suggest that Pillar One is unlikely to have significant effects on global investment levels. Pillar Two may increase effective tax rates for some MNEs, especially those engaged in aggressive tax avoidance. Importantly, both Pillars would reduce the effective tax rates dispersion and reduce MNEs’ profit-shifting incentives. This would be particularly beneficial for low and middle-income countries that often experience great losses from profit-shifting. An effective minimum level of corporate tax paid would also allow these countries to reconsider their domestic tax policies. Ineffective and inefficient tax incentives leading to effective tax rates below the minimum rate would become less appealing after the implementation of the reforms, as firms using incentives to lower their effective tax rate below the minimum tax rate would be subject to top-up tax. Also, the package should provide greater tax certainty—thus not adversely affecting the global investment environment overall—as opposed to the situation in which the absence of a consensus-based solution leads to uncoordinated and unilateral measures and risk of further tax and trade disputes. The Blueprint reports and additional economic analysis will provide a solid foundation for a future agreement. If Inclusive Framework members will implement the two Pillars, international tax policies will significantly change. Implementing these policies is important, as it would modernize the international tax rules, improve tax certainty, reduce BEPS behaviors, and provide additional tax revenues. ------------------------------ * <#m_-8846988259725305171__ednref1> *The Columbia FDI Perspectives are a forum for public debate. The views expressed by the author(s) do not reflect the opinions of CCSI or Columbia University or our partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.* ** <#m_-8846988259725305171__ednref2> Pierce O’Reilly ( [log in to unmask]) is a Tax Economist at the OECD Centre for Tax Policy and Administration. The author wishes to thank David Bradbury, Maria Borga and members of the Digital Economy Impact Assessment team for their helpful input. The authors wish to thank Stephen E. Shay, Raymond Mataloni and an anonymous peer reviewer for their helpful peer reviews. [1] <#m_-8846988259725305171__ednref3> OECD, “Measuring and monitoring BEPS, Action 11 – 2015 Final report,” in *OECD/G20 Base Erosion and Profit Shifting Project* (Paris: OECD, 2015). <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=77d1c8a35d&e=763bcf158c> [2] <#m_-8846988259725305171__ednref4> Bruce A. Blonigen, Lindsay Oldenski and Nicholas Sly, “The differential effects of bilateral tax treaties,” *American Economic Journal: Economic Policy*, vol. 6 (2014), pp. 1-18. [3] <#m_-8846988259725305171__ednref5> Jannick Damgaard, Thomas Elkjaer and Niels Johannesen, “What is real and what is not in the global FDI network?,” *IMF Working Paper *(2019) . [4] <#m_-8846988259725305171__ednref6> OECD, *Action Plan on Base Erosion and Profit Shifting* (Paris: OECD, 2013). <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=763edf04be&e=763bcf158c> *The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Pierce O’Reilly, ‘International tax reform and FDI,’ Columbia FDI Perspectives No. 302, April 19, 2021. Reprinted with permission from the Columbia Center on Sustainable Investment (* *www.ccsi.columbia.edu* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=91bedfd1c6&e=763bcf158c>*).” A copy should kindly be sent to the Columbia Center on Sustainable Investment at **[log in to unmask]* <[log in to unmask]>*.* For further information, including information regarding submission to the *Perspectives*, please contact: Columbia Center on Sustainable Investment, Riccardo Loschi, [log in to unmask] *Most recent Columbia FDI Perspectives* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=277e80a62f&e=763bcf158c> - No. 301, Manu Misra, “Investment facilitation and India: A closer look,” Columbia FDI Perspectives, April 5, 2021 - No. 300, Daniel Naujoks, “Engaging diaspora direct investors: The four elements of successful policy regimes,” Columbia FDI Perspectives, March 22, 2021 - No. 299, Axel Berger and Manjiao Chi, ‘The EU-China Comprehensive Agreement on Investment: Stuck half-way?,’ Columbia FDI Perspectives, March 8, 2021 *All previous FDI Perspectives are available at * *http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=43473717a3&e=763bcf158c> *. * *Other relevant CCSI news and announcements* - *On May 26*, 11am-12pm ET, CCSI will host Investment Treaties and a New Legal Imagination <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=708a8a9bfc&e=763bcf158c>. In the recently published book, *Investment Treaties and the Legal Imagination*, Nicolás M. Perrone excavates the origins and evolution of the legal thinking underpinning the investment treaty regime and ISDS practice. Three distinguished speakers will discuss with the author the implications of these findings for the future of international investment law. *Please see our website <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=c97c021493&e=763bcf158c> for more details and to register for this online event.* - *On April 15, *CSI hosted a discussion, moderated by Lise Johnson, on "Crippling Compensation in ISDS: Current Practices and New Approaches," which drew from and built on Martins Paparinskis's paper, A Case Against Crippling Compensation in International Law of State Responsibility <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=7f91db8e1d&e=763bcf158c>. Speakers included Christina Beharry (Foley Hoag LLP), Jonathan Bonnitcha (University of New South Wales), John Daley (US Department of State), Viren Mascarenhas (King & Spalding), Rodrigo Monardes (Ministry of Foreign Affairs, Chile), Martins Paparinskis (University College London). *View webinar video here <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=82d2ad7eda&e=763bcf158c>* . - *New volume published!* The Yearbook on International Investment Law and Policy <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=b1d9f6555c&e=763bcf158c> (edited by CCSI's Lisa Sachs, Lise Johnson, and Jesse Coleman) monitors current developments in international investment law and policy. Part One focuses on trends in foreign direct investment, international investment agreements and investment disputes, and Part Two looks at central issues in the contemporary discussions on international investment law and policy. This volume <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=0d20d38707&e=763bcf158c> includes a chapter <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=d29b8bcb27&e=763bcf158c> by CCSI's Jesse Coleman, Lise Johnson, Ella Merrill, and Lisa Sachs. Please visit our website <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=52ece477e2&e=763bcf158c> for more information and to automatically receive a 20% discount! Karl P. Sauvant, Ph.D. Resident Senior Fellow Columbia Center on Sustainable Investment Columbia Law School - Earth Institute Ph: (212) 854-0689 Fax: (212) 854-7946 *Copyright © 2021 Columbia Center on Sustainable Investment (CCSI), All rights reserved.* [log in to unmask] *Our mailing address is:* Columbia Center on Sustainable Investment (CCSI) Columbia Law School - Earth Institute, Columbia University 435 West 116th Street New York, NY 10027 Add us to your address book <https://columbia.us6.list-manage.com/vcard?u=ab15cc1d53&id=a61bf1d34a> unsubscribe from this list <https://columbia.us6.list-manage.com/unsubscribe?u=ab15cc1d53&id=a61bf1d34a&e=763bcf158c&c=1389ec8f19> update subscription preferences <https://columbia.us6.list-manage.com/profile?u=ab15cc1d53&id=a61bf1d34a&e=763bcf158c&c=1389ec8f19> [image: Email Marketing Powered by Mailchimp] <http://www.mailchimp.com/email-referral/?utm_source=freemium_newsletter&utm_medium=email&utm_campaign=referral_marketing&aid=ab15cc1d53&afl=1> -- *Karl P. Sauvant, PhD* *Resident Senior Fellow* *Columbia Center on Sustainable Investment* Columbia Law School - The Earth Institute, Columbia University 435 West 116th St., Rm. JGH 825, New York, NY 10027 | p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask] | w: www.ccsi.columbia.edu | t: @CCSI_Columbia <https://twitter.com/CCSI_Columbia> "More Attention to Policies! Improving the Distribution of FDI Benefits. The Need for Policy-oriented Research, Advice and Advocacy", "More and Better Investment Now!", "Facilitating Sustainable FDI in a WTO Investment Facilitation Framework: Four Concrete Proposals", "Multinational Enterprises and the Global Investment Regime: Toward Balancing Rights and Responsibilities”, “The *WIR* at 30: Contributions to National and International Policymaking", "An Inventory of Concrete Measures to Facilitate the Flow of Sustainable FDI: What? Why? How?", "Insulating a WTO Investment Facilitation Framework from ISDS", "The Case for an Advisory Centre on International Investment Law", "The Potential Value-added of a Multilateral Framework on Investment Facilitation for Development" are available at https://ssrn.com/author=2461782 . ____ AIB-L is brought to you by the Academy of International Business. For information: http://aib.msu.edu/community/aib-l.asp To post message: [log in to unmask] For assistance: [log in to unmask] AIB-L is a moderated list.