The ITPF News Blog is managed by the students at the University of Florida Levin College of Law International Tax LLM Program.
By Lorraine Eden
This project started with a clue and a hunch. The clue: The OECD’s Economic Impact Assessment (EIA) mentions that its estimates for automated digital services (ADS) use U.S. Bureau of Economic Analysis (BEA) data on the information sector. The hunch: BEA data might provide fine-grained estimates of the impacts of Pillar One Amount A at the country and industry levels for ADS and consumer-facing businesses (CFB). The hunch was correct. To the best of my knowledge, this article is the first to provide public estimates of the impacts of Amount A at the individual country and industry levels, from a single-country perspective. Corporate income tax (CIT) base gains and losses, by country and industry, are provided for both jurisdictions with MOFAs (majority-owned foreign affiliates with U.S. parents) and MOUSAs (U.S. majority-owned affiliates with foreign parents). Estimates using 2018 preliminary BEA data are provided for ADS, four CFB industries (pharma, retail trade, transportation, and wholesale trade), and all industries. The key results are: (1) From the U.S. perspective, Pillar One Amount A is primarily a U.S.-Europe story since MOFAs in Europe and European MOUSAs in the United States dominate foreign affiliate sales and profits for ADS, CFB, and all industries. (2) Europe in its role as host to MOFAs and the United States as host to European MOUSAs would, for most industries, be tax-relieving jurisdictions expected to give up CIT base under Amount A. Comparing the relative sizes of U.S. and European CIT base changes across industries suggests that Europe would lose relative to United States.
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