Jurisdiction Not to Tax, Tax Sparing Clauses and the Income Inclusion Rule of the OECD Pillar 2 (GloBE) Proposal: The Demise of a Policy Instrument of Developing Countries?

Aitor Navarro

Research output: Working paperResearch


The OECD Programme of Work on the tax challenges arising from the digitalization of the economy encompasses a so-called GloBE (Global Base Erosion) or Pillar 2 proposal, consisting in a series of measures aimed at establishing a floor to tax competition by achieving minimum taxation in all cross-border income streams. If implemented, developing countries would be severely deprived from the possibility to grant tax incentives to attract FDI to foster economic growth. This contribution emphasizes the importance of the thorough review developing countries should undertake on their tax policy preferences amidst the rapid adoption of GloBE that the OECD is pushing to achieve. To illustrate this concern, an examination of implementation issues shows that a deficient enactment of the income inclusion rule proposed in GloBE could paradoxically trigger the applicability of tax sparing clauses, aimed at protecting the effectiveness of tax incentives, even when both sets of rules pursue opposing goals
Original languageEnglish
Place of PublicationFrederiksberg
PublisherCopenhagen Business School [wp]
Number of pages39
Publication statusPublished - 2020
Externally publishedYes
SeriesCBS LAW Research Paper


  • Jurisdiction to tax
  • Tax sparing
  • Tax incentives
  • Pillar 2
  • GloBE
  • Tax treaties

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