Compatibility of Income Inclusion rule with EU Law. : GLoBE IIR and EU Law.

Abstract: In October 2021, 137 countries and jurisdictions agreed on a common approach towards a global minimum tax of 15% on the profits of large multinational companies that is referred to as the Pillar Two Model Rules, ‘Anti Global Base Erosion’, or ‘GloBE’ Rules. This political agreement implies that member countries who wish to implement such a tax regime have to streamline its design by modelling it after the so called Global Anti-Base Erosion Proposal (‘GloBE’) that the IF has developed as ‘Pillar 2’ of its work program on tax challenges arising from the digitalization of the economy. On 17 June 2015, the European Commission presented an Action Plan for a fairer and more efficient corporate tax system in the European Union (EU). The powerful document re-defines the future course of corporate taxation in the EU. The GloBE Model Rules are an opportunity – an impulse – for the European Union to begin coordinating tax rates in corporate income tax among its Member States and to proceed further, in the near future, in the direction of harmonizing those rates. On December 22, 2021, the European Union (EU) announced the Proposal for a Directive to ensure a global minimum level of taxes for multinational groups. It follows the Pillar Two implementation planoutlined in the Inclusive Framework (IF) statement released on October 8, 2021, and the model rules published on December 20, 2021.5In this thesis the authors focus on whether the Global Anti-Base Erosion (‘GloBE’) rules, specifically Income Inclusion Rule, as set out in an Organisation for Economic Co-Operation and Development (‘OECD’) Blueprint of October 2020, comply with the EU fundamental freedoms. This compatibility is tested based on two differentscenario’s. In the first scenario the assumption is taken that the GloBErules will be implemented directly by the Members States (Assumption A). It will be addressed by the rule of reason doctrine by analysing which freedoms are getting affected then making a restriction test, then justification test and finally the proportionality test. In the second assumption is that the GloBE-rules will be implemented indirectly through an EU Directive (Assumption B). This analysis will show that, even though the GloBE-rules conflict with the freedom of establishment, they could still be implemented effectively because of the considerable discretion granted to the Union legislature by the Court of Justice of the European Union (CJEU).7 The directive at discussion in the thesis is the Minimum tax directive 2022/2523.