Multinationals Need Universal Treatment on Pillar Two Credits

An OECD-led global agreement with provisions set to take effect on Jan. 1 continues to send ripples through the tax world. Among the many changes under the agreement lies Pillar Two—a set of rules designed to ensure multinational corporations pay a minimum level of tax.

One aspect of Pillar Two revolves around the treatment of tax credits. The distinction between the tax treatment of refundable versus non-refundable credits shines a light on what may be a loophole that consumes the foundational principles of equitable taxation.

Allowing refundable credits to be treated as income rather than a reduction in taxes paid ...