Abstract
Sovereignty allows nations to set their own tax rates, even when this power is used to adopt low or zero rates for the purpose of luring business activity and investments away from other countries. The result has been tax competition, which is disfavoured by many countries. Beginning in 1996, the G7 countries began work that was taken over by the OECD and that has become a proposal consisting of Pillars One and Two. Pillar One is outside the scope of this chapter. Pillar Two partially mitigates the evil of tax competition, which is a significant step in the right direction. Nevertheless, it leaves substantial room for continuing tax competition and imposes significant transition and complexity costs. A far better approach would be for countries that are hosts to multinational enterprises to adopt expanded worldwide taxation, without deferral, at their respective regular corporate rates.