Income Inclusion Rule: Compliance Costs

Maria Isaksen & Rebecca Alstrup

Student thesis: Master thesis


Based on the increased globalization and the emerging digital economy, this paper aims to investigate the compliance costs and benefits related to the implementation of the Income Inclusion Rule through the EU-directive ”Ensuring a global minimum level of taxation for multinational groups in the Union” in Danish legislation. The paper raises the following questions in order to answer the identified problem: 1. What will be the applicable law in regard to the reporting obligation based on article 42 in the EU-directive. 2. What compliance costs will the Danish companies and authorities experience. 3. How can the compliance costs be weighed against the expected benefits in order to conclude on the efficiency of the Income Inclusion Rule? This paper consists of one preliminary chapter and 3 analytical chapters. The purpose of the preliminary chapter is to ensure a solid understanding of OECD, the BEPS project including the Income Inclusion Rule, how OECD’s model rules are implemented in Danish law through EU-directives and briefly summarized the main reporting obligations in current legislation in Denmark, including key aspects. The legal analysis briefly examines the overall characteristics of the Income Inclusion Rule and further performs an interpretation of the wording in article 42 (Filing obligations) in the EU-directive from a Danish perspective and seeks to determine how the filing obligation will be implemented in Danish law. The economic analysis examines the expected benefits from implementing the Income Inclusion Rule and further the expected administrative compliance costs related to article 42 in the EU-directive, based on the interpretation performed in the legal analysis. Lastly, the integrated economic analysis seeks to apply economic theory to the legal analysis in order to understand if the Income Inclusion Rule and related filing obligations can be considered efficient. In conclusion, this paper has derived current law from the EU-directive’s article 42 on filing obligations relating to implementing the Income Inclusion Rule and further performed an analysis of the costs and benefits relating to implementing article 42 in the EU-directive in Danish law. This made it possible to derive a mathematical model to aid legislators in performing, at a later point, an evaluation of the efficiency of the Income Inclusion Rule. As such the purpose of this paper is not to reach a conclusion on the efficiency of the new Income Inclusion Rule, but merely to derive tools that can aid legislators, when the rule is in a more advanced stage, and it will be possible to perform an efficiency calculation based on available data.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2022
Number of pages120
SupervisorsPeter Koerver Schmidt