Erosion Rule Research Articles

Inter-Nation Equity And The Regulation of Tax Competition via the Global Minimum Tax Rule: A Case for Improvement

The Organization for Economic Co-operation and Development (OECD) is an institution that influences policymaking in international tax law, and it is changing the international tax architecture to deal with tax competition by encouraging countries to adopt a global minimum tax rule. This emerging rule – called Pillar Two in international tax circles – is inadequate for dealing with poverty and inequality in an asymmetrical global context. The rule is premised on the notion and argument that tax competition is a problem for international tax law. Notwithstanding, there is existing research and evidence to show that tax competition can also be a solution to the enormous challenge of poverty and inequality as it can have a redistributive effect. This is a valuable factor amid the inefficiently asymmetrical global society with extreme poverty in many countries and enormous wealth in a few others.This article submits that the Pillar Two minimum tax rule – the Global Anti-Base Erosion (GloBE) Rules encompassing the income inclusion rule (IIR), undertaxed payment/profit rule (UTPR), and qualified domestic minimum top-up tax (QDMTT) – should incorporate inter-nation equity to prevent exacerbating global inequality and poverty. Pillar Two intensifies these for at least two reasons: (1) it restricts the positive redistributive effects of tax competition on an inefficiently asymmetrical global society, and (2) it encourages tax competition more suited for high-income countries (HICs) and less suited for those that are low-income countries (LICs). There is latitude to incorporate a differentiated principle deriving from inter-nation equity into this new Pillar Two rule designed to regulate tax competition globally. This proposal requires that the emerging rule be disenabled in certain circumstances to enable LICs to choose whether to apply the rule without being worse off. The article’s proposal seeks to allow LICs room for effective tax competition needed to attain sustainable development goals.

Towards a new architecture for progressive international capital taxation

The application and operation of the Global Anti-Base Erosion (GloBE) Rules agreed at the OECD and released in December 2021 have both strengths and weaknesses for developing countries. Now is the time to address directly the multilateral institutional "architecture" in relation to international tax negotiations. Despite the current geopolitical tensions, the nature of climate change and increased possibility of future health pandemics have made the need for global public goods provision – and thus global tax coordination – even more necessary. Moreover, the GloBe rules reflect the underrepresentation of non-OECD members in the process of the "Inclusive Framework," as evidenced by their absence in key committee leadership, paucity of specialised delegates and lack of explicit voting rights. Therefore, it is correct to welcome the recent UN resolution to work towards a worldwide Tax Convention.

Article: Climate Clubs: An International Tax Law Perspective

Global carbon pricing has often been portrayed as an interesting idea that will never be implemented due to political hurdles. Yet, this description is being challenged: growing political support for climate clubs suggests that a global carbon price might become reality in the future. This article investigates the conditions for the adoption and implementation of a climate club based on a global carbon price by comparing it to the international corporate tax club created by Pillar Two, which was also described as politically impossible a few years ago. This comparison highlights that establishing a climate club will require addressing design issues and institutional obstacles that might be even more complex than those that characterized the negotiations of the global anti-base erosion (GloBE) rules. Climate club, carbon border adjustment measures, global carbon price, global carbon tax, GloBE rules, inclusive forum on carbon mitigation approaches, inclusive framework, international corporate tax club, Pillar Two

An innovative experimental apparatus for the analysis of natural gas hydrate cavitation erosion process using laser-induced cavitation.

Natural gas hydrates (NGHs) are an emerging source of clean energy distributed in the pores of soil sediments in deep seabed and permafrost zones with abundant reserves. Cavitation contains enormous energy, thus allowing radial cavitation jets to improve drilling and production rates of NGHs. This paper presents an experimental apparatus that was developed to synthesize NGHs and generate cavitation bubbles by laser for the analysis of the erosion rules of NGHs by cavitation in a reservoir environment. The apparatus consists of a working fluid injection and pressure control system, a temperature control and circulation system, a laser-induced cavitation system, a visual reaction vessel, and a data acquisition and measurement system. The laser-induced cavitation erosion on NGHs and multi-bubble interaction experiments can be conducted over temperatures and pressures in the range of 0-20 °C and 0-12 MPa, respectively, in a visualized reaction vessel. Hydrophones and high-speed photography were utilized for monitoring and analyzing the erosion process within the visualized reaction vessel. In addition, bubble groups of different components in various environments can also be tested in this apparatus to obtain the interaction characteristics under different conditions. This paper discusses the basic structure and principle of the apparatus and conducts a series of experiments to verify the effect of cavitation erosion on hydrate and the feasibility of using cavitation to increase production in hydrate exploitation.

Challenges at the intersection between investment provisions in regional trade agreements and implementation of the GloBE Rules under Pillar Two

A number of regional trade agreements (RTAs) include investment protection provisions that may limit a country’s ability to change tax measures. This limitation could raise concerns for States as regards the recently agreed global minimum tax under the Global Anti-Base Erosion (GloBE) Rules, as its implementation could amount to a breach of investment obligations. Therefore, this paper analyses how the GloBE Rules and their impact on investment incentives interact with investment provisions in RTAs, also considering the impact of the minimum tax on regional integration efforts and the potential for a regional approach to its implementation.

The Impact of the Global Minimum Tax on Tax Competition

This article examines the impact of the Pillar Two Global Anti-Base Erosion (GloBE) Rules on tax competition. It sets out and explores three main conclusions on the GloBE Rules’ impact on tax competition. First, the GloBE Rules set a floor on tax paid on profit by multinationals equal to 15% of “Excess Profit”. They also set a floor on competition among “source” countries. Second, the GloBE Rules may provide some countries with an incentive to raise revenues through a qualified domestic minimum top up tax rather than a corporation tax. Third, countries can compete below the floor by offering grants and “Qualified Refundable Tax Credits”. The article proposes an alternative design for the top-up tax calculation that may have been preferable. Overall, it concludes that the impact of the GloBE Rules on tax competition may be less straightforward and significant than may have been expected. The rules also create incentives that are not clearly desirable from a policy perspective.

The Global Anti-Base Erosion (GloBE) Rules and Tax Certainty: A Proposed Architecture to Prevent and Resolve GloBE Disputes

In the framework of the implementation of the global minimum tax – the Global Anti-Base Erosion (GloBE) rules – the development of effective dispute prevention and resolution mechanisms continues to be a key concern for both businesses and tax administrations, as also evidenced by recent public consultations promoted by the OECD. In the present study, the authors further develop as a standalone model the reciprocal domestic dispute resolution proposal already outlined in an earlier article of theirs published in the World Tax Journal. The authors also enhance this rule with a dispute prevention component and an adjustment provision taking into account the outcome of the dispute resolution. In particular, following the introduction, section 2. is devoted to a short classification of GloBE disputes and the presentation of the distinction drawn in this study between conflicts of interpretation (section 2.1.) and conflicts of transposition (section 2.2.) Section 3. displays the authors’ proposal to achieve tax certainty for the GloBE rules. They begin by setting out the fundamental principles of the proposal (section 3.1.) and providing a general overview of its architecture (section 3.2.). Turning to the concerns raised by the 2023 Public Consultation Document, the authors explain why their proposal would not lead to any override of domestic law and, therefore, should remain compatible with the principle of legality (section 3.3.). A detailed discussion of the key components of their proposal, most notably – as a complement to the domestic reciprocal dispute resolution mechanism – a new interpretative model rule and a new lex specialis model rule then follows in section 3.4. In section 4., a comparison is finally developed between the proposal by the authors and the option of a multilateral convention.

Assembly process and source tracking of microbial communities in sediments of Dongting Lake

Sediment source tracing can accurately provide a theoretical basis for controlling soil erosion effectively, by identifying the most serious types of land use. Traditional sediment tracing methods are based on physical, chemical, biological, and composite fingerprinting, which have not included microbes. As high-throughput sequencing becomes more prevalent, microorganisms can provide more information than what we think. Thus, whether the microorganism can also be used as a special fingerprint factor for sediment source identification during soil erosion, we have tested it by using microbial source tracking tool FEAST to quantify the microbe contribution from five types of eroded land (including dryland, urban, paddy field, forest and grassland) to the depositional areas (Niubitan) in the Yuanjiang basin. The source microbial community in the erosive area was heterogeneous, and assembly process analysis further demonstrated that the source tracking results could reach higher accuracy. The results of FEAST showed that dryland (35.50%), urban (17.21%), paddy field (8.14%), and forest (1.07%) were the major contributors to Niubitan. Our results follow the general soil erosion rules and prove its validity. Taken together, a new perspective is provided by these results for tracing sediment sources in erosion-sedimentary systems.

Pillar 2: tax competition in low‐income countries and substance‐based income exclusion

AbstractPillar 2 of the OECD's global tax reform proposal will have significant direct and indirect impacts for low‐income developing countries (LICs). Most interesting and problematic is the question as to how the global anti‐base erosion (GloBE) rules for a proposed global minimum effective tax will affect tax competition behaviour in LICs, and how LICs should respond when a critical mass of higher‐income economies adopt the new structure. Most LICs are source‐only countries, and they are very much in competition to attract foreign direct investment. Do LICs want to continue to compete using the tax system to the extent possible, to step back from that competition, or to take some intermediate course? Pillar 2 does not itself change a country's desired position on the competition spectrum – it merely affects how, and to what extent, that position can still be obtained. This paper posits that LICs should adopt qualified domestic minimum top‐up taxes, and that this will not itself have a negative impact on their competitiveness. The primary focus of the paper, however, is on the design of the substance‐based income exclusion (carve‐out), examining the following three questions. Should the GloBE have been designed without a carve‐out? Would there have been a better way of designing it? How will LICs be affected? The paper concludes that, as little real advantage is likely to accrue to LICs from intangible assets, minimising tax competition for those assets will have relatively little impact on them; and that, from an economic efficiency standpoint, shifting the tax burden away from a normal return and toward economic rents – albeit imperfectly – is a reasonable solution.

Article: Pillar Two and Developing Countries: The STTR and GloBE Implementation

This article argues that the Subject to Tax Rule (STTR), which was noted as an ‘integral part of achieving consensus on Pillar Two for developing countries’, is unlikely to raise significant revenue for low-income countries. This is because it is within both the power and interests of another actor (either the developing country’s treaty partner, or the relevant Multinational Enterprise (MNE)) to produce a better outcome for that actor under which the STTR will not apply. In order to retain support for Pillar Two from developing countries, the Inclusive Framework should explore mechanisms to provide tangible benefits to developing countries under the implementation of the Global Anti-Base Erosion (GloBE) Rules. This article considers three potential options which could be adopted as part of GloBE implementation and which do not require amending the GloBE Rules. These proposals allow developing countries to leverage the GloBE infrastructure (as well as the administrative capacity of revenue authorities in developed states) to improve the integrity of their tax bases as well as to raise additional revenue if they choose to do so. STTR, subject to tax rule, GloBE, minimum tax, Pillar 2, Pillar Two

The Dutch Anti-Base Erosion Rule: Recent Developments in the Context of Fraus Legis and EU Law

Recently, the Dutch Supreme Court has raised several probing cases on article 10a of the Dutch Corporate Income Tax Act 1969 (CITA) (also known as the Dutch anti-base erosion rule) in a short period of time in the context of fraus legis. In one of these rulings the Dutch Supreme Court appears to be taking a remarkable path which in the authors’ view does not algin with the trias politica concept. Moreover, in literature many questions are raised on whether the Lexel ruling of the Court of Justice of the European Union has an impact on the sustainability of the Dutch anti-base erosion on which the Dutch Supreme Court finally referred preliminary questions on 2 September 2022. In this article the authors will provide the reader with the current state of affairs in relation to article 10a CITA – in particular in the context of fraus legis and EU law.

Article: The Potential Impact of Pillar Two on Tax Incentives

After lengthy negotiations, the OECD proposed its model rules on Global Anti-Base Erosion Rules (GloBE) on 20 December 2021. They impose a minimum tax rate of 15% on large multinational companies wherever they operate. Consequentially, the GloBE rules are intended to render tax incentives ineffective to the extent that they reduce the effective tax rate (ETR) on in-scope entities below 15%. Moreover, tax competition should also level off at 15% as tax incentives would no longer increase the attractiveness of a jurisdiction to the extent that they reduce the ETR below this amount. Nevertheless, several design aspects of Pillar Two risk obstructing those objectives. Most notably, the substance based carve-out excludes routine profit from substantive activities from the scope of the GloBE rules on a formulaic basis. This means that incentives can theoretically be maintained and tax competition can continue for this income. In practice, however, the design of the carve-out entails that it does not distinguish between incentives for substantive income and those for non-substantive income. Moreover, the combination of the substance based carve-out and the qualified domestic minimum top-up tax (QDMTT) could result in a new form of tax competition. international effective minimum taxation, GloBE, Pillar Two, tax incentives, substance based carve-out, qualified domestic minimum tax, OECD, tax competition

GloBE: Why a Nominal Tax Rate of More Than 15% Might Not Be Enough

This article explains why the effective tax rate for the purposes of the Global Anti-Base Erosion (GloBE) rules may deviate from the nominal corporate income tax rate and fall below 15%, even in high-tax jurisdictions. It further addresses the (non-)application of the substance-based income exclusion in loss situations.

Study on the Cone Angle of Sliding Sleeve Ball Seat in Open Hole Staged Ball Throwing Fracturing

In the ball type fracturing sliding sleeve, the contact surface between the ball socket and the fracturing ball is the most vulnerable part to failure. Once the contact surface fails, the sealing of the fracturing sliding sleeve will fail, the fracturing fluid will leak, and finally the fracturing will fail. The contact condition between the ball socket and the fracturing ball is mainly determined by the cone angle of the ball socket. In order to improve the contact condition between the ball socket and the fracturing ball as much as possible, and extend the service life of the sliding sleeve, based on fluid erosion and finite element structural analysis, this paper has carried out the analysis of the cone angle of the fracturing sliding sleeve. Firstly, the erosion of the ball seat is analyzed, and the erosion rate of the ball seat under different cone angles is obtained. The conclusion is that the erosion rate of the ball seat is proportional to the cone angle of the ball seat. Combined with the working conditions of the ball socket fracturing, the finite element analysis of the ball socket structure is carried out, and the stress conditions of different cone angles are compared. Finally, combined with the erosion rule and force analysis of the ball socket, the optimal cone angle of the ball socket is 20 °. When the cone angle of the ball socket is 20 °, the force of the ball socket meets the strength requirements of the ball socket, and can obtain a higher service life.

Causes and Impacts of Global Minimum Tax

To address remaining Base Erosion and Profit Shifting problems and challenges arising from the digitalisation of the economy, the OECD conceives an inclusive framework on the Two-Pillar approach, in which Pillar Two envisages a global minimum tax, also known as Global Anti-Base Erosion Rule, setting a floor for enterprises’ tax-avoidance structures and jurisdictions’ tax race to the bottom. This essay adopts study methods of literature review, case study, and data analysis, trying to make a comprehensive study on the causes, concrete rules, and potential impacts of the global minimum tax thus providing ideas for its implementation.

Disequilibrium river networks dissecting the western slope of the Sierra Nevada, California, USA, record significant late Cenozoic tilting and associated surface uplift

Abstract The timing, rates, and spatial patterns of elevation change in the Sierra Nevada, California, USA, have long been the subject of vigorous debate owing to their importance in constraining the tectonic history of western North America and models of orogenesis. Here we present a systematic analysis of multiple measures of fluvial geomorphology along the entire length of the range and interpret these observations using 1-D and 2-D landscape evolution modeling based on the stream power fluvial erosion rule with the rate parameter calibrated from a large data set of millennial-scale erosion rates. We demonstrate that westward-draining rivers in the Sierra Nevada are in a disequilibrium state and that this state is consistent with the transient fluvial response expected from significant down-to-the-west tilting in the last 11 m.y. Assuming rigid-block tilting and using multiple independent measures of tilt magnitude, we find that the magnitude of surface uplift from late Cenozoic tilting appears to have been similar along strike and likely resulted in ~500–1300 m of surface uplift at the crest (0.3–0.8° tilt) from the Yuba through the Stanislaus rivers (~39.2–38.2°N) and 1000–1400 m of surface uplift at the crest (0.6–0.9° tilt) from the Tuolumne River south through the Kings River (~38.2–36.4°N). We show that the transient fluvial response to tilting in the northern Sierra is heavily modulated by heterogeneous lithology and drainage area exchange in a manner that reconciles the high spatial variability in basement incision observed in numerous prior studies. However, we find that heterogeneous lithology alone cannot explain both the transient state and observed patterns in channel steepness, which seem to require late Cenozoic changes in tectonic forcing. Beyond the regional implications of a short-lived rapid pulse of late Cenozoic surface uplift along the entire length of the range, our results demonstrate that a range-wide approach in which river networks are analyzed both in planform and profile can elucidate tectonic histories despite heterogeneous lithology and ongoing changes in network topology.

Tax Treaty Obstacles in Implementing the Pillar Two Global Minimum Tax Rules and a Possible Solution for Eliminating the Various Challenges

This article addresses the interaction between the global anti-base erosion rules (GloBE rules, namely, the income inclusion rule, IIR, and the undertaxed payments rule, UTPR) with tax treaties. In particular, the article analyses potential limitations to the application of the IIR by the provisions of article 9 of tax treaties. Further, the article investigates possible obstacles to the application of the IIR to tax treaties that contain tax sparing clauses. The article then conducts a similar analysis with respect to the UTPR, which is assessed from the perspective of article 9 and the non-discrimination provisions of article 24. Furthermore, the article explores whether importing article 9(1) into the list of exceptions to the saving clause would be appropriate, and the related consequences. Thereafter, the article gives an insight into the problem of tax treaty overrides which may arise if the Pillar Two rules are implemented in national legislation without making relevant changes to tax treaties. Moreover, this contribution also explores the dispute resolution instruments available to solve potential tax disputes that could arise when “taxation not in accordance with the convention” is detected, as well as other tax disputes that could arise from inconsistent application of the GloBE rules. The authors also highlight possible ramifications under non-tax agreements for such situations. In light of the strong arguments made in this article which indicate that conflicts could indeed arise and treaty overrides could occur, the authors put forth a solution in the form of a safeguard clause – as opposed to a saving clause or interpretative MAPs – that policymakers can incorporate in their treaty network to ensure that the GloBE rules can be applied without triggering frictions with tax treaty law. On the other hand, if such a clause is not inserted into tax treaties, then there is a concrete risk that an unforeseen obstacle of considerable magnitude could arise on the path of the Pillar Two initiative. Of course, the Pillar Two rules should be applied within the boundaries of the safeguard clause and if a state goes beyond its authorization, a conflict with the provisions of the treaty could once again arise. This could then possibly give the taxpayers access to MAPs for misapplication or inconsistent application of the Pillar Two rules. Needless to say, such a clause needs to be implemented through a Multilateral Agreement, which the authors discuss in this contribution. Finally, the authors also analyse selected treaty law-related discrimination issues linked to domestic minimum taxes that are being contemplated by several jurisdictions.

The study on erosion of buckling tubing string in HTHP ultra-deep wells considering fluid–solid​ coupling

As the first barrier of wellbore integrity, tubing string is an important guarantee for safety production. However, with the rapid consumption of oil and gas, the mechanical environment in wellbore is becoming more and more harsh, which poses a challenge to the safe service of tubing string. In order to systematically study the erosion of buckling tubing string in high temperature and high pressure (HTHP) ultra-deep wells, the researches on buckling deformation and erosion of tubing string are carried out gradually in this paper. There are three steps in the research process: (a) The tests including metallographic, mechanical properties and hardness of studied tubing material are carried out, and the test results are the basis of the next numerical simulation; (b) the finite element model (FEM) of whole section tubing sting-packer-casing is established to study the buckling deformation of tubing string due to the comprehensive effect including piston effect, ballooning effect, temperature effect, friction effect and buckling effect; (c) according to the buckling flow passage, FEM of tubing erosion is established based on erosion mode, fluid–solid coupling and impact of sand on each other. Finally, the erosion rule and failure region on tubing are obtained. The researches presented in this paper can provide reference and guidance for predicting erosion and protecting the tubing string.

Are the OECD/G20 Pillar Two GloBE-Rules Compliant with the Fundamental Freedoms?

In this article the authors focus on whether the Global Anti-Base Erosion (‘GloBE’) rules, as set out in an Organisation for Economic Co-Operation and Development (‘OECD’) Blueprint of October 2020, comply with the EU fundamental freedoms. This compatibility is tested in two distinct scenario’s. In the first scenario the assumption is taken that the GloBE-rules will be implemented directly by the Members States and in the second scenario the assumption is taken that the GloBE-rules will be implemented indirectly through an EU Directive. It is clear from the analysis of the first scenario that the GloBE-rules collide with the freedom of establishment. For the GloBE-rules to be fully in line with this freedom, it is recommended that they include a substance-based carve-out such like the one foreseen in Article 7(2) of the Anti-Tax Avoidance Directive (ATAD). The analysis of the second scenario, which focuses on the EU principles of subsidiarity and proportionality, shows that, even though the GloBE-rules might collide with the freedom of establishment, they could still be successfully implemented given the broad discretion that the Court of Justice of the European Union (CJEU) leaves to the Union legislature. Nonetheless, also here recommendations are made to reduce disproportionate frictions. Pillar II – GloBE – OECD – BEPS – Minimum taxation – Tax competition – European Law – Freedom of Establishment – Subsidiarity – Proportionality

A glacial buzzsaw effect generated by efficient erosion of temperate glaciers in a steady state model

Studies on relief and hypsometry in glaciated mountain ranges have recognized the equilibrium line altitude of glaciers as a major control on mountain height. This has led to the belief that, in contrast to fluvial topography, glacial topography is limited by climate, with tectonics playing a secondary role. This concept is known as the glacial buzzsaw. However, the understanding of controls on glacial relief has remained mainly qualitative, in part because a reference scenario for glacial landscape evolution — a glacial topographic steady state linked to the base level by a fluvial topographic steady-state downstream of the glacier terminus - and its dependencies have not yet been defined. Here we define such a reference and compare steady state longitudinal profiles in a coupled system of glacial and fluvial erosion that involves both tectonics and climate. Our model is based on the stream power law for fluvial erosion, the shallow ice approximation in combination with a glacial erosion rule, and an empirically determined drainage area-flow length relationship for both rivers and glaciers. Further, we introduce a new approach to incorporate dendritic glacier network structures into the one-dimensional model. Modeling of coupled glacial-fluvial steady-state profiles with empirical glacial and fluvial erosion parameters shows that the difference between glacial and fluvial relief depends on climate, tectonics and the applied erosion laws. Our results imply that glacial erosion can typically balance tectonic uplift rates at lower relief and topographic slopes than fluvial erosion. This steady state equivalent of the glacial buzzsaw effect suggests that glaciers may indeed be more efficient erosional agents than rivers increasing erosion in a cooling climate.