The Global Minimum Tax (OECD Pillar Two) and EU Law: what's next?

Taxation as a phenomenon, dates back to the before AD era, even though as a term appeared later in history and started to get more substantial with the time reflecting the changes of economies, societies, and governments. With the evolution of taxation, more laws and regulations had to be put into place considering the increasing complexity and the difficulty of monitoring the fair collecting process. Since ancient times taxpayers tried to find legal ways to lower their tax burden and this was later recognized under the formal concept of Tax Avoidance. Tax avoidance occurs when a taxpayer engages in legal transactions with the main objective of securing a tax advantage, rather than for genuine business purposes, leading to outcomes that do not align with the purpose of taxation laws and regulations. Multinational Enterprises always seek room to commit tax avoidance in the disparities that exist in the national taxation systems therefore Corporate Tax is an important subject to monitoring and regulations which need to be up to date with the evolving business world to ensure fairness. Globalization and digitalization of the economy have brought new challenges for the taxation systems. While it becomes easier to operate internationally, the system needs to adapt to the new operational ways of the Multinational Enterprises which tend to optimize their tax planning thanks to sophisticated strategies. This and the increase of the weight of intangible assets in their balance sheet structures complicate the governments’ efforts to efficiently apply their tax regulations. The initiative to fight this phenomenon was firstly taken with the issuance of the report “Addressing Base Erosion Profit Shifting” by the Organization for Economic Cooperation and Development (OECD) in 2013 and evolved thanks to continuous work until the issuance of the OECD Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. The two initiatives Pillar One and Pillar Two are designed for worldwide implementation and the latter will be the main focus of this thesis. Even though within the European Union, interactions seem to be more regulated, facing a global initiative means making sure it will be in line with EU law and national tax sovereignty. Moreover, the pace of implementation could differ and what could be also questioned is whether the companies will remain within the EU jurisdictions, or they will migrate outside of it, seeking a more relieved tax burden. This thesis examines, with the help of secondary data, the extent to which OECD Pillar Two will be embraced within the legal frameworks and jurisdictions of EU countries, how will they react to it and how will the companies’ decisions be influenced by this new initiative. It additionally focuses on pinpointing areas where improvements can be made and exploring potential future steps to strengthen efforts against tax avoidance, by observing the evolution of the existing measures in a worldwide context.