Taxing Digitalized Space: On the Roots and Reach of Claims to Global Tax Jurisdiction

Abstract: Facing a digitalized global economy, where almost half of multinational corporate profits go untaxed, we find ourselves on the verge of tax revolution. With its two-pillar solution, the OECD seeks to lay the first building blocks of a new system for cross-border corporate income taxation. To counter avoidance, states are presented with an international top up minimum tax, to be charged at multinational groups ultimate parent level. The Pillar II proposal entails a jurisdiction for rich countries to tax all the untaxed foreign income of all foreign entities of resident multinational groups – no matter where they are based. By describing the state and histories of existing regimes of Controlled Foreign Corporation (CFC) rules, and of the processes and practices that enable and engender these regimes, I will explain to what extent the global tax landscape is ready carry claims to global tax jurisdiction. Adding an extra layer of understanding, I use Jurisdiction theory in a broader discussion on how state taxing powers are produced.