February 2024

OECD two-pillar global tax framework at risk

Posted on February 28, 2024 by admin

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (IF) represents a significant overhaul of international tax rules, aimed at addressing the tax challenges arising from the digitalisation of the economy. The global tax solution seeks to ensure that multinational enterprises (MNEs) pay a fair share of tax wherever they operate. Over 130 countries were signatories to the initial deal in 2021. The final deal included several concessions, including by Ireland to cap the minimum tax threshold at 15%, instead of the initial wording that would have allowed tax rates under these rules to exceed it.

The framework is based on two separate pillars. Pillar One focuses on the reallocation of taxing rights over MNEs to the countries where their goods or services are consumed, regardless of the MNEs’ physical presence there. The Pillar’s scope covers MNEs with global turnover exceeding €20 billion and profitability above 10%. This pillar introduces a new nexus rule not tied to physical presence and allocates taxing rights through a formula that considers the revenue generated in each market jurisdiction.

Europe remains a global leader in innovation, ability to commercialise lagging

Posted on February 21, 2024 by admin

In 14 February 2024, the European Commission published its 2024 Annual Single Market and Competitiveness Report. The report, following established KPIs that define competitiveness based on nine distinct drivers, aims to give a comprehensive overview of both positive and negative trends within the Single Market. As part of the report, the Commission also produced a staff working document on the key findings from the European Monitor of Industrial Ecosystems. Part of this document characterised the position of EU industries in the global technology race and how the EU has fared against its global competitors, in particular the US and China.

The first element covered concerns innovation capacity within the EU regarding green and digital technologies. Though the absolute number of transnational patents filed in the EU has remained stable in comparison to the US, China’s rise in the last few decades has decreased the relative share of EU patents held. The EU’s world share of transnational patents filed has decreased from around 32% in 2010 to 23% in 2020. Similarly, on green transition-related global patent applications, the EU still holds leadership, although there also its share has decreased from 30% in 2010 to 24% in 2020. There are sectoral differences regarding the patents filed by the geopolitical powers, with the EU dominating the patent environment in wind power, having an approximate world share of 62% of patents in that area. Additionally, it is tied with China in solar power, with both having approximately 27% shares of patents, whereas the US is ahead concerning energy-saving technologies, having a global share of 41,3%.

ExxonMobil sues investor activists for “micromanaging”

Posted on February 7, 2024 by admin

Shareholder activism in the oil and gas industry has gained traction in recent years, with activist shareholders pushing multinational conglomerates towards sustainable practices to decrease the negative and harmful impact that fossil fuel production has. Thus far, the companies have been ambiguous in their promises to decarbonise and have not made any significant transitions towards the marketing slogans that they have put forth.

Still, the efforts by activist groups seem to be having an impact beyond what executives in these companies would tolerate, exemplified by ExxonMobil recently filing a lawsuit against Follow This, an Amsterdam-based investor activist group, and Arjuna Capital, a registered investment adviser. The suit claims that the activist proposal violates SEC rules for investor petitions, which disallow resubmitting proposals that do not gain investor support over time.

The goal of the lawsuit is to block a motion that the activist group, as an ExxonMobil shareholder, had put forward at the company’s annual investor meeting, to increase the pace for reducing greenhouse gas emissions. This was the first time that the company had turned to courts to block a shareholder motion. Even though filing the lawsuit that ExxonMobil filed succeeded in practical terms, forcing activist investors to shelve the call to motion, ExxonMobil has decided to continue with the lawsuit.