International Corporate Tax Regime Post-BEPS: A Regulatory Perspective

Among the other rationales underlying the existence of corporate income tax (CIT) as a standalone tax on the profits derived by legal entities, some scholars have underlined its regulatory function, i.e. its potential to steer the behaviour of private sector actors. In this regard, it has to be noted that significant constraints on the use of CIT as a regulatory tool have emerged in the aftermath of the base erosion and profit shifting (BEPS) project. One example may be found in the new 'modified nexus approach' with regard to tax incentives for R&D activities. This article takes a regulatory perspective regarding the recent attempts to overhaul the 'international corporate tax regime', resulting in the adoption of new hard-and soft-law rules. The regulatory perspective is understood here as the capacity of the rules of international tax law to affect the behaviour of both corporate taxpayers in arranging their cross-border activities and the States in designing their CIT systems. The BEPS initiative, being an unprecedented exercise in tax coordination aimed at widespread avoidance practices, serves as a prime example of how international tax law fulfils its regulatory function, by guiding the behaviour of both governments and taxpayers. Accordingly, the paper argues that the international corporate tax regime post-BEPS exhibits two sides of the same regulatory coin: on the one hand, taxpayers are disincentivized to resort to particular types of international tax planning ; on the other, the incentives for individual States to engage in corporate tax competition are significantly reduced. It is further argued that the most far-reaching proposal in this area relates to 'global minimum tax', drawn under Pillar Two of the 'BEPS 2.0' initiative