David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: making sense of side-by-side.

In January, the OECD published a large set of guidance on pillar 2 that included the side-by-side agreement. This agreement focused on U.S. multinationals and how they may, or in this case may not, be taxed under pillar 2. 

Today we’re featuring a discussion on the ins and outs of the side-by-side agreement, headed by Tax Analysts CEO and President Cara Griffith. She sat down with four international tax leaders and experts — Danielle Rolfes, Mounia Benabdallah, John Connors, and Isaac Wood — who you’ll hear more about in just a minute. 

Their discussion is part of our Taxing Issues webinar series. If you’d like to hear the full hour-long conversation, you can find the link to that in our show notes. 

For now, I’ll hand it over to Cara as we go to that interview. 

Cara Griffith: The side-by-side agreement emerged from G7 and inclusive framework discussions to address the concerns of countries that had not implemented pillar 2, and that planned instead to operate their own minimum tax regime. Those countries were concerned that a pillar 2 minimum tax would overlap with their own domestic minimum tax, and as a result, subject their multinationals to double taxation.

On January 5, the OECD inclusive framework released significant guidance to address how the pillar 2 GLOBE rules would apply in particular to U.S. multinational groups. This guidance reflected the agreement that the United States and other G7 countries reached last summer to effectively deem the U.S. tax system compliant with pillar 2, and exempt U.S. multinationals from certain top-up taxes.

The new guidance focuses on companies based in a jurisdiction with an eligible tax system, which essentially means a jurisdiction that imposes a minimum tax. Those companies that are subject to a domestic minimum tax may be able to eliminate part or all of their obligations under pillar 2's income inclusion rule or IIR and undertaxed profits rule, or UTPR.

That being said, the side-by-side guidance does not alter taxpayers' obligations under qualified domestic top-up tax, or QDMTT, regimes. While the side-by-side agreement could apply to other countries, the United States, at the moment, is the only country listed in the OECD's central record as having an eligible domestic tax system for purposes of the side-by-side safe harbor. The agreement provides for a stocktake process, which is expected to be completed in 2029, to assess any distortionary effects of the agreement and to encourage other countries to qualify.

In addition to introducing the side-by-side framework, the guidance also extends the one-year transitional country-by-country reporting [CbCR] safe harbor, and introduces a permanent simplified effective tax rate safe harbor and a new substance-based tax incentives safe harbor. We should remember that because the side-by-side agreement is effective starting January 1, U.S. multinationals will have to do pillar 2 calculations in all in-scope jurisdictions for 2024 and 2025. Also, the side-by-side agreement does not eliminate their other pillar 2 compliance obligations. They remain subject to QDMTTs, as well as certain reporting obligations.

Nevertheless, most multinationals and their advisors are pleased with this guidance because it reduces the likelihood of double taxation and simplifies their ongoing compliance. So the developments are compelling, the issues are complex, and yet the future remains, to a significant extent, uncertain. We have a wonderful panel today to provide background, debate the issues, and explore what we can expect in the future. So, let me introduce them.

First, we have Danielle Rolfes. She's the partner in charge of the KPMG Washington National Tax practice and a Tax Analysts board member. Next, Mounia Benabdallah is a partner in Baker McKenzie's International Tax Group. We have John Connors, the chair of the International Chamber of Commerce's Global Tax Commission, and we have Isaac Wood, acting Treasury deputy international tax counsel. I'm delighted to have all of you here with us today, and thank you so much for coming on to share your thoughts and your expertise.

Mounia, let me start with you. I tried to do as quickly as I could with as few acronyms as possible, even though there's a whole ton of them, background on how we got to side-by-side. But could you provide a little bit more in-depth detail on the side-by-side safe harbor?

Mounia Benabdallah: Sure. Happy to do so, Cara. It always helps to start with the bigger picture. So, the package that we got on January 5 actually, as you mentioned, has four interlocking components. You already mentioned the permanent simplified ETR safe harbor. We have the one-year extension of the transitional CbCR safe harbor, the substance-based tax incentives safe harbor, and last but not least — but the package itself calls the side-by-side system, which contains, again, of two safe harbors, side-by-side safe harbor, and the narrower UPE [ultimate parent entity] safe harbor. So, the politically prominent piece, I guess, is the side-by-side safe harbor that you're asking about. That is essentially the element that allows multinational groups whose ultimate parent entity sits in a jurisdiction with what the agreement calls a qualified side-by-side regime to elect out of the IIR and the UTPR, as you mentioned, anywhere in the structure of that multinational.

Today the United States is the only jurisdiction listed as a qualified — or eligible as a side-by-side regime in the OECD central record, but it's not meant to be an exclusive list. If we look at the eligibility bar for this side-by-side safe harbor, so if we take a little bit of a deeper dive, that is set at a jurisdictional level. So, qualified side-by-side regime, we look at the jurisdiction, say the U.S., and what we're looking for is both an eligible domestic tax system, broadly a 20 percent statutory rate, QDMTT or a financial statement-based corporate minimum tax at least 15 percent or above, no material risk of sub-15 percent outcome, so that's the domestic piece. And then also an eligible worldwide tax system with comprehensive coverage of foreign income, genuine BEPS [base erosion and profit shifting]-addressing mechanisms, and the same no material risk standard applied to foreign operations. So, that is really more of the detail on the side-by-side safe harbor.

And what I would emphasize, and you mentioned it rightfully as well, is this package preserves that QDMTTs remain first charge on in-country top-up tax for everyone, including these groups that may elect for the side-by-side safe harbor. All in all, you could say that the inclusive framework's common approach is retained, and the whole arrangement is indeed underpinned by a stocktake that the inclusive framework will conclude by 2029, which we'll discuss a bit later on.

Cara Griffith: Wonderful. Thank you. Isaac, let me turn to you. Now, we've got a little bit more meat around the bones of what the side-by-side agreement is and the package as a whole. From your perspective and maybe from Treasury's perspective, what was the aim of this agreement?

Isaac Wood: Thank you, Cara. As part of my job at U.S. Treasury, I serve as a delegate to the working party at the OECD that does the technical work on the pillar 2 global minimum tax. From that perspective, I'm happy to recount what the U.S. goals were for the side-by-side package. The first goal was for the U.S. tax system to sit side-by-side with the pillar 2 global minimum tax. And that means you'd have the U.S. tax system applying to U.S.-headquartered companies, and the pillar 2 global minimum tax apply to non-U.S. headquartered companies, but U.S.-headquartered companies would not be subject to two overlapping minimum taxes. The second goal was protecting U.S. tax incentives from the pillar 2 global minimum tax. This was especially important for the U.S. research and development credit. Our perspective was the U.S. R&D credit is incentivizing the same activity as other countries' R&D credits that had originally received more favorable treatment under pillar 2, and we were looking for a parity in that treatment and greater protection for U.S. tax incentives in general.

Those are the two objectives. I will say for U.S.-headquartered companies, the second objective is kind of subsumed within the first, right? Because if the pillar 2 global minimum tax is not applying to their U.S. earnings because of the safe harbor, then that solves the problem itself. But we did need a special rule within the pillar 2 global minimum tax to achieve the protection of U.S. tax incentives in the case of a foreign-headquartered company that might, for example, be headquartered in a country that has adopted pillar 2 and would be applying it to that company's U.S. earnings.

Cara Griffith: One follow-up question before I turn to Danielle -- is Treasury satisfied with the agreement as it came out? Or were there big items that didn't get addressed or would like to have addressed in the future?

Isaac Wood: Yeah. I think when you think about those two goals, I think that those were very much achieved, and we've been pleased with the feedback we've heard from stakeholders on the Hill, in the business community, and elsewhere. I think we're very pleased to have delivered on those two goals.

Now, is there more work to be done? Absolutely. I think one area that we hear where U.S. companies are looking for the next thing is — they want to understand precisely is what their reporting obligations, for example, are going to be? That's work where I think we were able to establish some good principles in the side-by-side agreement, but there's more technical work to be done to translate that into the actual guidance that taxpayers can rely on.

Cara Griffith: That makes perfect sense. Danielle, to turn to you, does this answer the longstanding — and by longstanding, not really that, but a few years standing — question of how the U.S. tax system will coexist with pillar 2? Does this actually provide us an answer that is workable going forward?

Danielle Rolfes: I think it does. I think the U.S. administration, the OECD Secretariat, and the inclusive framework countries that worked to reach this result deserve a lot of credit. There are some details yet to be worked out and we're going to talk about that — we still have to wait for local implementation, but in terms of a framework for having the U.S. tax system coexist with pillar 2 and not have the risks of double tax that have already been alluded to, I think it achieves the aims. I think U.S. multinationals are not out of pillar 2 because as already been noted, they're still subject to the qualified domestic top-up taxes and a lot of local jurisdictions have adopted those taxes, which means U.S. multinationals still have a stake in the ongoing discussions at the OECD, particularly around how the simplified ETR safe harbor will work and whether it's possible to achieve further simplifications.

Also, from that standpoint, because so many countries did adopt qualified domestic top-up taxes, there is a question in particular around the investment hubs of, do any of those jurisdictions look to roll back those taxes? We have not seen any of that to date, but U.S. companies are exposed and so, also interested from that perspective.

Cara Griffith: Interesting. John, your group represents business interests internationally. I'm curious from your perspective, what are you seeing as sort of the politics and the perspectives of where we are today and where do we expect to be going in the future?

John Connors: Thanks, Cara. Let me answer that from an international business perspective, not just from the U.S., but also in terms of the historic context of where we are. Let's not forget that the OECD has pursued the BEPS agenda for more than a decade now. And we started with 38 member countries, which has been expanded to the inclusive framework of 147 countries or jurisdictions cooperating on international tax reform.

Now, BEPS 1.0 was 2015 or thereabouts, which focused on those 15 actions to combat tax avoidance and harmful tax practices by bringing greater transparency to tax reporting and the affairs of business. So, something that's progressed a lot in 10 years. BEPS 2.0 in 2021 introduced the two-pillar concept of introducing the global minimum tax of 15 percent and new taxing rates for market jurisdictions.

Now, the former seemed destined for broad agreements some time ago. The latter seemed way off. I think the business community has always been a little skeptical, shall we say, about the very premise for this work, that the governments, particularly in the developing world, are being denuded of significant tax revenue from multinational enterprises. But notwithstanding that skepticism, the business communities broadly accepted the concept and the compromises that have been proposed, but I think we've been frustrated by the complexity of emerging rules and the overlap and interaction of a series of different rules and reporting requirements. And I think by some potentially changing goalposts as we go along, and there's a little bit of uncertainty about whether the side-by-side solution will deliver what was originally envisaged or whether we really know what was originally envisaged. We'll perhaps come back to that in a moment.

But there was certainly a general acceptance from the business community that a broadly common framework for international taxation would genuinely be better than a plethora of different rules, each focused on different parameters for the taxation of digital services or something broader than digital services. I think having gone along with that over a period of time, I think the community external commentators were very confused by the response of the inclusive framework, first of all. Particularly lower-income countries that suddenly, having signed up to a process, felt that their needs were not being met and the process was not actually inclusive. And then of course, I think we had the bombshell following the change of U.S. administration, the withdrawal of active support for the process, and the pretty destructive U.S. section 899 proposal.

The side-by-side agreement perhaps shifts the goalposts a little bit. I know there are certain sectors and there are certain countries that are not entirely happy with the outcome, but it certainly provides a way forward and hopefully puts an end to the risk of a tax war between the U.S. and the rest of the world, which was the big concern for everybody.

So, more work to be done, though, because I think two things that we remain concerned about are administrative complexity, both for business and tax authorities, and notwithstanding what you said in the introduction about the certainty that it provides and the long-term simplicity perhaps from where we might have been, but also concerns about, well, what really are governments' expectations long term? So over the next few years we may see a broad implementation of pillar 2, but I suspect without a material impact on government revenues. And so, we remain a bit skeptical as to whether there's sufficient intergovernmental common ground to adopt and implement pillar 1, either in its proposed or amended format.

What does this mean? There's concern that we could see more fragmentation of the system, more complexity, uncertainty, and risk of double taxation given that the whole point of pillar 2 was to ensure a common approach throughout OECD countries.

But I think the advantage is that the safe harbor may give back more flexibility to countries in the design of their tax policy. Ideally, we'd like to see a sound, predictable, and stable tax system — one that encourages and rewards enterprise and growth. And I think that's where we'd like to see the debate go beyond just this almost fixation with the BEPS process, tax avoidance, profit shifting, reallocation of profits, etc. So, let's hope for a slightly different focus in the coming decade than what we've seen in the past.

Cara Griffith: I mean, that's a good point. The focus that we hope at this point is going to shift to implementation. Here we are: How do we implement it, and where are the pain points and the complexities going to be, and what needs to be done to ease that?

Danielle, I want to ask you one political question, and then we're going to turn to the implementation and get a little bit more into the nuts and bolts. John mentioned section 899. Does the side-by-side agreement effectively prevent the U.S. from imposing some sort of retaliatory tax in the future or at least reduce the likelihood?

Danielle Rolfes: Well, I think it reduces the likelihood. Nothing can tie the hands of a future Congress. I think there were a couple of lessons learned from Congress's flirtation with section 899. The first one was that it worked. I do think section 899 was effective at probably at least accelerating getting the G7 agreement and countries to come to the table. They took it very seriously. Their multinationals took it very seriously as a real competitive threat. So, one lesson that our congresspeople took away from it was that that threat worked.

On the other hand, I also think that Treasury and Congress heard a lot from investment firms, big banks, that to some degree, [section] 899 was a "cut your nose off to spite your face" provision, that it could be harmful to U.S. markets. So, I think we do know that even after [section] 899 was polled, there was some drafting that continued on it to consider different versions.

Those didn't see the light of day. I hope they don't, personally. But if we think about whether they could, I would imagine one: If a country slow-walked implementation, we're going to talk about implementation, but countries need to incorporate this in their domestic law. And I would suggest that a country not slow-walk implementation, because a number of congressmen are already on the record that they're watching and they think [section] 899 is fit for purpose to address a slow-walk.

I also think, I mentioned that drafting, there were subsequent drafts that we didn't have the opportunity to see out here in the public, but it is possible to imagine because a lesson was learned that a threat worked, that a future flare-up could be something that we can't imagine today. It could be countries doubling down on DSTs [digital services taxes]. Who knows? But could there be a more tailored version of section 899 that didn't raise some of the same concerns that I think made it in the mutual interest of the U.S. and our foreign counterparts to not want to see [section] 899 on the books, even apart from whether it was triggered?

I think it was harmful to U.S. markets to have such a broad provision even be enacted into law. And even if we were very hopeful that the trigger would never be pulled on the [section] 899 gun, it still spooked inbound investors, conservative investors.

Cara Griffith: For sure, without a doubt. That's interesting. Well, let's jump forward and talk about implementation. Mounia, if I could come to you. The side-by-side agreement has been incorporated into EU law. It was done through a commission notice, but there are still a lot of questions on implementation in the EU.

I know a lot of your practice is focused on EU work. Can you talk to us about what's going on with implementation? What questions remain, and what are the challenges that are going to be faced as these localities move towards implementation?

Mounia Benabdallah: Absolutely. We do need to start indeed at EU level because the EU pillar 2 directive itself was designed with an agreed mechanism for exactly this. We have what people know as article 32 of the EU directive, also known as the safe harbor derogation provision. It basically provides that where all EU member states unanimously agree on a qualifying international safe harbor, the top-up tax due in any EU member state is deemed to be zero where the conditions of that agreement that they agreed to are met. That's a pretty straightforward and clear provision, a simple instruction to member states — deem the top-up tax zero — and it's there precisely so that specifically agreed safe harbors can flow into the directive without each safe harbor requiring renegotiation of the directive, which can be a very painful, highly political process.

And by the way, this is the same provision that was used for the prior three or four safe harbors that we have seen in the past couple of years, including the transitional UTPR safe harbor. So, the commission notice that you referenced that came out on January 12, just a few days after the package was released, doesn't really incorporate these safe harbors. It basically just confirms unequivocally what article 32 already provides for, and it signals to EU member states and to taxpayers how that mechanism applies to the January package in particular.

It's not really a workaround, but more so part of a mechanism that the EU directive was already built to accommodate. It was already built into the directive. That said, confirmation at EU level is one step, and local implementation is another. Because it's still a directive, and procedurally under EU law, member states still need to implement these rules into their local rules, whether it's law or guidance; they have some flexibility.

Even though they've already agreed to it at EU level and they're bound by these rules, they still need to implement it just like any other directive. And from experience, we know that member states always transpose EU law at different speeds and different levels of technical precision. In that sense, they have their own procedures and timelines to follow, and taxpayers that need to take certain positions for the current year in which the rules should apply are often working ahead of fully developed local law and local rules, and that's a live conversation with many taxpayers right now. So, I think practically what we've seen, if we also look at how generally directives are implemented, I always say Q3 or Q4 is when we're going to probably see more significant developments. And over the summer is usually when we see some of this going through parliaments and through legislative processes, and it's going to definitely be a 2026 project across the EU.

Cara Griffith: Isaac, we mentioned the stocktake process. Mounia mentioned it; I mentioned it. Can you talk to us a little bit more about what it is? What's the purpose and then the general timing? We've got this 2029; is it happening in [2029], is it before? Can you just give us a little more detail on that?

Isaac Wood: Yes, sure. So, the side-by-side package does reference a stocktake, and it references concluding by 2029. And the purpose is that the stocktake is supposed to allow all countries to evaluate where we are on the pillar 2 global minimum tax at that time. It's not just about the side-by-side safe harbor, but it's also how well the pillar 2 global minimum tax is meeting its policy objectives, including countries that have implemented it. Now, there is not a specific process that's been decided yet. There's no output that's envisioned from that yet. If there is a desire for any changes to the pillar 2 global minimum tax rules, that would require consensus of the inclusive framework members at that time, including the United States.

I think it's really trying to answer this question, which I think John pointed to as well of where are we going to be further down the road and acknowledging that we cannot know today what that will be, but setting forth this commitment that just as we have for years, I guess coming on decades within the inclusive framework, had these conversations about the policy objectives and where we are towards achieving them, that committing to once again have that conversation in the coming years.

Cara Griffith: Danielle, and I'll come to John and Mounia as well. What does the stocktake really mean? Do you have an expectation of what we're going to see, what we're going to look for? Is this a magic year for taxpayers and they're going to see something that they didn't expect? Danielle, I'll come to you first.

Danielle Rolfes: Yeah, let me start with U.S. MNEs. I think they never take anything for granted, and they've certainly taken note of the stocktake, and there's been some angst in the system of, "Oh, is this temporary?" And I know the question has been asked: Would a future Democratic administration take a different approach with the OECD?

In fact, I heard Pascal Saint-Amans, the former director of the Center for Tax Policy at the OECD, suggest on a podcast that a future Democratic administration might take a different approach. I think that is totally wrong. That was a little strong. I should have caveated it because I'm on a webcast. I think that is wrong.

Why do I think that is wrong? I think folks might have a superficial reaction like that because they remember that the Biden administration, when they were in the middle of trying to legislate Build Back Better, were advocates of pillar 2, and they had kind of walked away from the idea that the U.S. would be on equal footing and were trying to get changes through our Congress that would orient the U.S. more towards pillar 2.

We were never going to wholesale adopt it. We were talking about GILTI [global intangible low-taxed income], country-by-country, and the like. So, in that political context, Democrats were trying to raise taxes on GILTI and make GILTI a stronger global minimum tax. And multinationals were saying, "This will hurt our competitiveness." And as part of trying to address those concerns — and this is my perspective, I wasn't in the government at that time — the Biden administration saw it as consistent with their legislating aims to address those concerns of multinationals about competitiveness through a strong pillar 2 that would facilitate them raising the GILTI rate, going to country-by-country and GILTI, and then they would be able to rebuff those competitiveness concerns. That is not where we are now. We now have side-by-side. So, if the future Democratic administration, if we imagine when they get to the 2029 stocktake, if a future Democratic administration wants to raise taxes on U.S. multinationals and their overseas earnings, they're free to do so.

They can pursue that policy of raising tax revenue in order to fund other policies. And pillar 2 is there potentially to address the competitiveness concerns of U.S. multinationals, but there's no reason for a future Democratic administration from a policy perspective, that I can see, to want to undercut what this administration negotiated, because having two competing global minimum taxes apply to a U.S. multinational is incredibly complicated. And although you will have heard many say that they projected they weren't going to owe material top-up tax because they weren't subject to low taxes abroad, the fact that our global minimum tax, the U.S. global minimum tax, GILTI, has a totally independent set of rules for how to determine taxable income, does mean that in odd circumstances, companies would be subject to very real exposure to double tax.

Although it contemplated that U.S. would give a foreign tax credit for qualified domestic top-up taxes, the rules are totally different and there is no foreign tax credit carryforward and GILTI. So, the risk of double tax would've been very significant. The risk of a lot of complexity — I mean, all the reasons that the Trump administration has argued for why side-by-side is appropriate would continue to be true in the context of future Democratic administration. So, I understand that superficial reaction where people remember that the Biden administration was advocating for a different outcome for the U.S. in pillar 2, but I think we've significantly changed the scene setting for a future Democratic administration. Maybe that's enough about U.S. multinationals. I'll just say, I think non-U.S. multinationals will probably be looking to the stocktake potentially to try to argue now — are they at a competitive disadvantage, and can they use that as an opportunity to get further simplifications? Or I'm sure there's hopes of further rollback of pillar 2. That will likely be their perspective.

Cara Griffith: Are there countries that are currently modifying their systems to attempt to be eligible for side-by-side that you're aware of?

Mounia Benabdallah: Well, definitely Brazil, I think it's the only one that I'm aware of that has, I think there was some reporting last week, that has formally submitted a request to be considered eligible. But if we take a quick step back on that one, as we know, the side-by-side package actually creates two safe harbors at the UPE level. So, we spoke about those before. It's the full side-by-side safe harbor, which has the domestic and the worldwide leg, basically. And we have the UPE safe harbor, which we didn't get to in too much detail, but that's basically the narrower version that relieves only UTPR exposure at the top-up level, basically our old transitional UTPR safe harbor, but then a little bit redefined. And I think it's important to mention that there's a critical distinction that the UPE safe harbor, that one is effectively closed to new entrants based on amended laws.

But then for the side-by-side safe harbor, the more comprehensive one, that one is different. And the inclusive framework expressly contemplates that other jurisdictions can initiate requests for access. I believe there was a first wave that already closed, and then there's a second wave in 2027 and 2028. So, there is a formal principled pathway for new entrants through the side-by-side route, but it's the higher bar.

And honestly, redesigning a national tax system specifically to qualify as a qualified side-by-side regime with all the different elements, I cannot think of one jurisdiction that would want to have the complicated U.S. system. So yeah, I guess we have to see, but for now, Brazil, I think is the only country that, at least if we can believe the reporting, has formally applied.

Cara Griffith: Isaac, I want to turn to you for a second and get, from Treasury's perspective, from your perspective, can U.S. multinationals comfortably rely on the side-by-side safe harbor? I also wanted to pose a question on guidance. We've talked early on reporting obligations and things like that, and if there's any sense of when additional guidance will come out.

Isaac Wood: Yeah. So, first of all, I think on the side-by-side safe harbor itself, I think that both Mounia and Danielle covered good aspects. So, there's questions about when you're going to have implementation — locally, and of course, U.S. multinationals like any company are looking for whatever certainty they can get. That means domestic implementation to law, and of course it's relevant for financial reporting as well. The other aspect of it, which Danielle talked about, is this idea of stability or how much trust they can have that this agreement gets implemented. And I'll just add one thing to the points Danielle made, which is there's a benefit of this OECD process in that it's based on consensus and documents only get published if no country objects. And that could be frustrating sometimes when we're trying to reach consensus, but it's a big advantage once consensus has been reached.

If a country has an issue with something, they will have already raised that issue and that will have been resolved. In terms of what else might be coming, looking forward to, like I said, I participate in the technical working party at the OECD that does the technical work on pillar 2, and that does include additional guidance coming forward. And I should say, to begin, that the U.S. does plan to be just as involved in that technical work going forward as we have been since the beginning of the project, and that's because as U.S. Treasury, we see two U.S. interests. First, this is what Danielle mentioned, many U.S. companies are operating in foreign countries that have adopted domestic minimum taxes that are modeled on the pillar 2 rules. So, for these companies, we want to reduce their compliance costs, we want to avoid unintended outcomes, and we want to increase certainty.

And then secondly, we have foreign companies, like I mentioned at the beginning, that have U.S. operations and may be subject to pillar 2 taxes imposed by, for example, their headquarters country. And in that context, we can raise issues about the interaction of U.S. tax rules with the pillar 2 rules, again, just pushing for simplicity, pushing for certainty, and avoiding unintended outcomes. So, there is technical work that's ongoing that we're still involved in. The working party is still meeting on that.

I think there's a number of places where the projects are well known and were previewed in the side-by-side package itself. One of those items that probably have most interest in the U.S. is of course on the reporting aspect, but there's other work streams as well, including on simplicity, additional safe harbors. We had a transitional safe harbor based on what's called "routine profits" or "de minimis profits" for when you have a low level of profit or no excess profit in a jurisdiction.

And those transitional safe harbors are slated to expire. So, the idea is just like in the side-by-side package where we added a permanent safe harbor based on an effective tax rate calculation, that we would add a permanent safe harbor that's based on these de minimis or routine profits concepts. So, all that work's ongoing, it's too early to know when the next round of publication is. I think this ties back actually to the consensus point. Whenever someone asks for any prediction on this, it's kind of impossible to tell the answer because the answer is when we get consensus, the technical work has to be done and everyone in the room has to be satisfied.

Cara Griffith: I'm curious, Danielle, are there situations in which a U.S. multinational would not want to make a side-by-side election?

Danielle Rolfes: I'm going to show you that I can give a short answer: No. U.S. multinationals can't opt out of GILTI or CAMT [corporate alternative minimum tax]. So, this isn't like the situation where we all say, "Oh, you have to model it to pick which regime is better." You're stuck with GILTI and CAMT. So, I really cannot conceive of a situation where you would say, "Please, may I have another?"

Cara Griffith: Is there a shift away from international tax coordination and back towards more national competitiveness? Does side-by-side encourage that? I'm opening that up to anyone who would like to venture an answer.

Danielle Rolfes: Maybe I would say that — well, first, I think we're all, maybe I'm speaking only for myself, pretty exhausted of really big global projects with the G20 mandate to finish it on this very accelerated timetable that makes it very difficult to get good business input. And trying to get consensus among so many countries tends to result in not simpler rules, but more complicated rules. So, I think we could all take a breath maybe from the big OECD projects, but on your question about a turn to competitiveness, we didn't get to spend very much time here on the substance-based tax incentives, like the new guidance that we got there. And I actually think that guidance — there are some really strong guardrails around what those new qualifying tax incentives, and they really turn on substance in the country. So, I don't think those new rules are going to be very interesting to tax havens because you're capped at 5.5 percent of your payroll and depreciation on tangible property in the country.

But for countries that really are competing for that kind of investment in their country, please put your people here, please put your heavy build here, there is a loosening of the ability for those countries to be able to offer tax incentives to draw that investment in. And especially for the U.S., where we have really substantial depreciable property and payroll here, I think within Congress's budgetary constraints, their hands are freed to consider incentives. So, I do think that that playing field has been opened somewhat, and I would expect countries to respond.

Mounia Benabdallah: And just to add to that, I don't think there's anything wrong with some competitiveness. I think really what the project is meant to do is put some guardrails around it and maybe not the race to zero, but I mean, apparently 15 [percent] is enough and we have a lot of jurisdictions across the world that have a statutory rate or a headline rate that's well above 15 [percent]. So, I think it's inevitable that we'll continue to see some competitiveness and it's probably good for business as well.

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