FROM TAX COMPETITION TO SUBSIDY COMPETITION

Recent international tax reforms provide an advantage to non-tax subsidies over economically equivalent tax benefits. Under several international tax standards, multinational enterprises are generally better off when they receive non-tax subsidies instead of equivalent tax benefits. As a result, countries now have a stronger incentive to adopt non-tax subsidies in order to attract the investment of multinational enterprises. This tax-driven preference for non-tax subsidies could shape the landscape of international tax and subsidy competition in the future. This Article contends that this preference cannot be justified on policy grounds. To treat equivalent measures similarly, this Article proposes several changes in the international tax standards, as well as the design of the OECD's recent proposal for a global minimum tax.