Anti-Base Erosion Measures under the OECD/G20 Pillar II Global Minimum Tax Framework in ASEAN Member States

Abstract

This research consists purposes were 1. to examine the extent to which domestic anti–base erosion legislation in ASEAN aligns with the OECD/G20 Pillar II framework, particularly the GloBE rules 2. to analyse the interaction between national tax laws, including income tax and incentive regimes for foreign investors, and the Pillar II framework as operationalised through GloBE, with an emphasis on potential inconsistencies in the application of rules and/or the hierarchical structure of rules as well as the distribution of taxing authority and 3. to evaluate Pillar II's legal and policy implications for national tax system design (with respect to both reforming existing incentive structures and modifying administrative processes) and to determine jurisdictions' ability to maintain control over their tax policies in a global context. This study adopted a qualitative research study using a structured doctrinal legal matrix as a primary research instrument to facilitate a comparative analysis of international tax standards and domestic tax legislations. Based on this analysis, the results indicate the following 1) Two types of adoption model are used for the Income Inclusion Rule and the Qualified Domestic Minimum Top-Up Tax, including the early adopter model used by Thailand, Singapore, Malaysia, Indonesia and Vietnam (which include them in their domestic statutes) and older anti-avoidance rules used by the Philippines, Brunei, Cambodia, Laos and Myanmar 2) the application of domestic anti–base erosion laws significantly conflicts in the region, notably increasing compliance costs for multinational enterprises due to conflicting and duplicative interactions between the GloBE rules and domestic anti-avoidance regimes (including controlled foreign company rules and 3) legal and policy measures as suggested in this study must be adopted to minimise the risks that the GloBE model rules pose in terms of fiscal impact on ASEAN countries’ economies so as to protect the fiscal sovereignty and competitive advantages of the ASEAN region. These measures include expenditure-based incentives as an alternative to conventional tax holidays to encourage new investment and stimulate economic development.