Tax News & Views International Weekly: Pillar Two's Escalating Compliance Costs

Since the beginning of the Organization for Economic Cooperation and Development’s Pillar Two project—which created a 15% global minimum tax being implemented across the globe—the focus has been on the potential compliance burdens. Many companies claim that they are far more worried about how to comply with the complex new reporting rules, than they are about any taxes they’ll end up paying under the new regime.

There have been few solid figures yet in the discussion—just a lot of anecdotal evidence. But Tax Foundation Europe, the Brussels-based branch of the conservative-leaning U.S. think tank, may have finally shed some light on the potential scale of the issue. The Foundation, along with the German economic research organization ZEW, recently issued a discussion paper which estimated that the compliance cost could reach into the billions.

The paper states that companies in the European Union could initially spend up to 2 billion euros to comply with the system, with recurring annual expenses of 517 million to 865 million euros.

Those are eye-grabbing figures, especially since the paper only shows compliance costs in one geographic area.

Some EU officials are calling for some context, though. Benjamin Angel, a high-ranking tax official for the European Commission, noted in a LinkedIn post that these are aggregated costs for more than 2,000 applicable companies. He also referred to Tax Foundation statistics which suggested, he said, that the annual cost for American companies to comply with the 15% corporate alternative minimum tax is much higher. (Though this would be for a smaller group of very large corporations.)

According to a 2024 OECD report, Pillar Two could raise between $155 billion and $192 billion in overall new tax revenue per year, including not only direct payments under the new regime, but increased overall corporate taxes as profit-shifting declines.

While this debate is centered on Europe, it could have implications for the U.S., especially as U.S. and OECD officials try to pin down remaining details on the side-by-side agreement allowing U.S.-based companies to largely escape taxation under the Pillar Two regime. While there is agreement on that broad principle, one of the issues that remains unanswered is whether U.S. companies will need to file the global informational return that’s key to compliance with Pillar Two. There are still situations where it would be relevant, despite the side-by-side exemption–for instance, it’s used to calculate local qualified domestic minimum top-up taxes, which U.S. companies would still pay. Many companies which will not end up owing taxes could still need to spend time and resources doing the calculations.

The idea with the GIR is that companies will just have one form to file that could be used wherever Pillar Two taxes will be paid. But there are still enough variations between national laws used to implement these rules that the reporting requirements can increase exponentially.

Maintaining the unsteady peace between the U.S. and the OECD could hinge on finding a way to relieve U.S. companies from these compliance burdens—even if they apply in the rest of the world. But to make the system more manageable overall, the OECD may need to devise some more safe harbors to streamline compliance in practice.

Noteworthy Items This Week

US Companies Prep for Global Tax Bill That Might Disappear – Lauren Vella, Bloomberg Tax ($):

It remains to be seen whether members of the Inclusive Framework—nations’ delegates involved in the global tax negotiations—can meet the end-of-year deadline to reach an agreement on the parameters of the side-by-side system.

The substance of the agreement will also have an impact on how quickly countries can codify an exception for US businesses into law. For example, there are open questions about whether the agreement will be a high-level political commitment with little technical details, or a fully-formed plan for implementation with robust technical guidance.

If technical work still needs to be done, the time spent on this work could push the date of side-by-side enactment for many countries by months—even years.

Irish Pharma, Tech Avoiding Tariff Hits for Now, Watchdog Says – Ryan Hogg, Bloomberg Tax ($):

In a report, the Irish Fiscal Advisory Council said US multinationals in the technology and pharmaceutical sectors, which account for much of Ireland’s corporate tax receipts, had avoided negative impacts on profitability from a tariff war set off earlier in 2025 by the US administration.

The threat of tariffs may instead serve to temporarily boost Ireland’s corporate tax receipts, IFAC said, owing to a surge in exports by pharma groups to the US ahead of any additional levies.

“This concentration risk is amplified by the risk of further policy changes in US and international tax, trade, and industrial policy,” the report said.

Rich Nations Say Draft UN Tax Rights Overhaul Goes Too Far – James Munson, Bloomberg Tax ($):

Internet marketplaces and platforms called for discussion with Mexico’s government about measures approved by Congress this week requiring companies to provide real-time tax information and combat false invoices.

The government should enter into dialogue with companies and civil society groups before publishing regulations later this year to define technical details and the tools required to implement authorities’ access to platforms’ tax information, according to Fabiola Peña, regional manager for the Mexican chapter of the Asociación Latinoamericana de Internet.

Three Compelling Historical Arguments Against the Trump Tariffs – Joseph J. Thorndike, Tax Notes ($):

The most important historical argument against the Trump tariffs centers on the congressional power to tax. “The power to impose tariffs — like the power to levy taxes — belongs exclusively to Congress. This is no formality,” a brief filed by a group of constitutional scholars says. “The nation was born of the slogan ‘no taxation without representation,’ which means that the authority to tax, raise revenue, and shape the public’s economic obligations is a law-making power, not an executive function. It must rest with the people’s elected representatives.”

Indeed, the authors of the Constitution were only slightly removed from the great tax and tariff debates of the Revolutionary era. Taxes were a core grievance for the colonists, who objected to levies enacted by a Parliament in which they had no meaningful representation. At the time of the Constitutional Convention, the Boston Tea Party was not the touchstone of American political culture that it has since become. Still, the founders understood that taxes were pivotal to the nation’s formation.

Everyone Has an Opinion (Letter) on Puerto Rico’s Act 60 – Lauren Loricchio, Sarah Paez and Chandra Wallace, Tax Notes ($):

Act 22 provisions provide full exemptions from Puerto Rican income taxes for interest and dividends from local sources and for gains on capital assets accrued and realized after an individual becomes a resident. Under the law, individuals benefiting from the incentives must be physically present on the island for at least 183 days of a tax year.

But the incentives have been misused. One area of abuse involves the sourcing of capital gains by investors who establish residency in Puerto Rico to take advantage of the incentives, implicating long-standing areas of tax law like partnership holdings as well as newer issues presented by cryptocurrency.

Public Domain Superhero of the Week

Every week, a new character from the Golden Age of Comics, who’s fallen out of use.

This week’s entry: The Conqueror

Debut Year: 1941

Debut Publication: Victory Comics #1

Origin Story: An American pilot who crashlanded in the Rocky Mountains and was brought back to health by a reclusive scientist's Cosmic Ray Lamp, he uses his new abilities to fight the Germans in Europe during WWII.

Superpowers: Aside from superior physical strength, the mad scientist's ray gave him acute intelligence.

Eide Bailly's International Tax Team and our affiliates at HLB, The Global Advisory and Accounting Network, stand ready to assist with your worldwide tax needs.

Tax News & Views International Weekly: Pillar Two's Escalating Compliance Costs

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