US multinationals unprepared for BEPS 2.0, suggests EY tax co-leader
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US multinationals unprepared for BEPS 2.0, suggests EY tax co-leader

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Jose Murillo, US-based partner and national tax department co-leader at EY

How BEPS 2.0 will operate in practice isn’t settled as far as the US government and multinational companies are concerned, a senior industry figure tells ITR

BEPS 2.0 rules are more complicated for multinationals than it first appeared, according to senior EY tax figure Jose Murillo.

Murillo, US-based partner and national tax department co-leader at EY, made the claim as he spoke to ITR regarding what parts of BEPS 2.0 need to be finalised before 2024.

The OECD’s BEPS 2.0 reform package comprises a two-pillar approach aimed at helping to address tax avoidance, ensure international tax rules are coherent, and create a more transparent tax environment.

The package includes the OECD’s pillar two agreement, which aims to ensure that multinationals with revenues of at least €750 million ($794 million) pay an international minimum effective tax rate of 15% in all countries in which they operate.

The US has yet to commit to pillar two, unlike other major jurisdictions including the UK, Canada, Australia and all EU member states, and Murillo predicts that the nation will compromise on the proposal.

“One big outstanding question is, ‘what is the US going to do here?’

“Is it going to inform the pillar two rules? Is it going to go its own way and not do anything? Or is it going to compromise somewhere in the middle?

“My guess is that we’re going to have to compromise. We’ll be somewhere in the middle,” Murillo says.


He explains why the US’s global intangible low-taxed income (GILTI) regime, which effectively imposes a worldwide minimum tax on foreign earnings, is crucial to his viewpoint.

“The US is not going to conform completely because it already has its own form of minimum tax: the GILTI regime,” he tells ITR.

However, he argues there are differences between the regimes.

“The rate is not 15%. It’s between 10.5% and 13.125%. It’s very similar to what pillar two is.

“The big difference is that the US regime is blended … All countries are blended together to get to the minimum rate.”

In contrast, under the pillar two rules each separate jurisdiction must meet the 15% rate.

“The political commitment that this administration made as part of the pillar two negotiations was to reform our GILTI system to apply on a per country basis,” Murillo says.

“That was it. That was the only commitment that was made. The rest of the GILTI regime could stay as is, and with that change it was going to be considered [a] compliant regime.”

Playing politics

As with any other jurisdiction, US adoption of pillar two’s income inclusion and undertaxed payments rules is optional, Murillo says.

What the US ultimately decides to do on pillar two is largely dependent on the outcome of the upcoming presidential and congressional elections, Murillo argues.

His prediction comes as both the Democratic and Republican Parties are engaged in primary elections to determine their presidential candidates for 2024.

“If President Biden wins re-election, he’s obviously a huge supporter of this deal because the US Treasury department has led these negotiations,” Murillo tells ITR.

A Biden victory would see continued support for reforming the US’s GILTI regime to bring it closer to pillar two without ruling out further implementation of the OECD proposal, he suggests.

On how far the US will go in implementing pillar two, Murillo predicts: “I don’t think we’re going to adopt the inclusion rule because we have our own controlled foreign company rules already.

“We may adopt the undertaxed payments rule, but that largely depends on what happens on [Capitol] Hill, and who’s in charge of the House [and] the Senate,” he says.

Long way behind

Murillo tells ITR that as US multinationals start digging deeper, they are realising the rules are “a lot more complicated than they seemed on the surface”.

A global minimum tax of 15% seems straightforward because it is based on book income, and firms must do financial statements on an annual basis anyway, Murillo says.

But he adds: “Once they start digging in [and realise] all of the adjustments that are required, what’s in, what’s out … it’s more complex than it seems because it’s all new.”

The novel rules particularly affect the US, where book income is a less prevalent idea, Murillo argues.

“In the US there is very little in our internal revenue code on book income. It’s sort of a new concept and not something that anyone has done.”

US multinationals are not yet fully prepared for BEPS 2.0 rules because they don’t have enough guidance, Murillo suggests.

He believes they still require help to have a good handle on how the rules will work in practice.

The basic infrastructure for pillar two is “pretty much set” from the perspective of those negotiating, Murillo believes.

“And we’re just left with filling in some of the practical details on how the calculations are going to work,” he tells ITR.

The lack of preparedness on the part of big firms appears to be underscored by an EY survey published earlier this year.

The survey polled 1,600 executives at more than 1,000 large companies in 32 jurisdictions and across 18 industries.

Conducted by Oxford Economics from April to May 2023, the survey found that 90% of respondents expected to experience a “significant” or “moderate” impact from BEPS 2.0 but only 30% had completed a BEPS impact assessment.

Sensitive subject

The US government may be unprepared for the BEPS 2.0 rules, but it has already passed the Inflation Reduction Act (IRA), which may yet have an impact on pillar two.

“[The IRA] includes a lot of green incentives for oil and gas-based technology. And that’s a sensitive topic because … within the pillar two calculation, some credits and incentives are treated differently to others.

“Refundable credits get more favourable treatment than non-refundable credits.

“It’s really in ours and this administration’s interest that the benefits of at least the credits and incentives under the [IRA] receive preferential treatment,” Murillo adds.

Whether the US adopts pillar two could well be determined in the next 12 months. The question is, can multinationals get ready in time?

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