The Implementation of the Global Minimum Tax and the notion of Tax Sovereignty

Abstract

The debate surrounding the taxation of multinational enterprises has recently taken a significant turn, with initiatives to implement a global minimum tax inspired by the Organization for Economic Cooperation and Development's (OECD) Two-Pillars strategy. This development prompts several reflections on the intended introduction of this policy, its technical and practical implications, and, more importantly, the potential impact on states' fiscal sovereignty. Some initial context is necessary to better understand the issue at hand. This work aims to analyse the proposal for a Global Minimum Tax (GMT) from the normative perspective, as well as considering whether and how this tax might challenge certain fundamental principles of taxation, such as the concept of sovereignty or the principle of territoriality. Taxation was originally seen as a typical dimension in the State's power, which shows up in the form of finding the funds required to keep the State functioning and running. More recently, taxation has been viewed as essential to the growth of state institutions and the achievement of community goals, providing the necessary funding for vital services such as healthcare, education, and defense. How economic operations are conducted on a global scale have an impact and question the requirements of territorial connection with the State for taxation purposes. This creates a tension between the sovereign use of the taxing power and the processes of economic globalization. The work first discusses the genesis and gradual development of the general concept of State sovereignty. Then, if analyses how the pervasive processes of political and economic globalization have resulted in a partial reduction of State sovereignty from the national perspective, which directly impacts the topic of taxes. In the light of the reflections contained in the first part of the work, the OECD's Two-Pillars strategy is analysed, highlighting the underlying idea that a new global approach to taxing multinational corporations is needed. The analysis is supplemented by a thorough explanation of the coordinates that support the OECD proposal to introduce a GMT. The work also is to consider the conflicting relationship between the State's fiscal sovereignty and the adoption of a GMT. This work aims to provide a general framework of the fiscal policy objectives that underpin the OECD project and answer the question whether a comprehensive architecture of global taxation exists, or just some sporadic initiatives have been adopted. In addition, the work examines the potential critical profiles that could be identified by the implementation of the GMT. For these purposes, we first consider the structure and rules of the Directive n. 2022/2523/UE of 14 of December 2022 which introduces the GMT into European countries. Then, we focus on the implementation of the GMT into the Italian legal system. The analysis deals with the potential systemic challenges in the effective implementation of the GMT and the potential effects that such legislation could have on the constitutional principles of equal treatment and ability to pay. To this end, reference is made to the constitutional principles of the Italian legal system. In order to improve the analysis of the implementation of the GMT in Italy, a comparison is made with other countries.