JCT estimates of OECD-led tax deal Pillar Two released

The staff of the Joint Committee on Taxation has prepared an analysis (attached below) of the potential revenue impact to the US Treasury of implementation of Pillar Two around the world that includes projections showing a range of revenue implications, from a revenue loss over 10 years of as much as $174.5 billion to a revenue gain of as much as $224.2 billion.

The analysis was requested by House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee ranking member Mike Crapo (R-ID) and was released this afternoon by Sen. Crapo.

The analysis begins with the assumption that all countries that have announced they will legislate Pillar Two this year do so. The analysis then includes five different forecasting scenarios, including whether the rest of the world enacts Pillar Two and the US does not, and whether the rest of the world enacts Pillar Two and the US does as well.

The JCT analysis notes that, "the range of revenue effects is significant and highlights the uncertain effect Pillar Two implementation may have on Federal tax receipts. In the lower bound, with US MNEs assumed to shift their low-tax profits to QDMTT jurisdictions, any residual US tax on those profits is eliminated by the corresponding foreign tax credits. In the upper bound, with US MNEs assumed to shift their low-tax profits to the United States, there is significant increase in Federal tax revenues. The range of potential effects is meant to highlight the level of uncertainty here and is not meant to represent a likely outcome."

A Crapo press release is available here.

For additional information with respect to this Alert, please contact the following:

Washington Council Ernst & Young

• Any member of the group, at (202) 293-7474.