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Threading the Needle: Pillar Two and the IRA’s Green Energy Credits

Cross-border Tax Talks

CHAPTER

The Importance of Good Covered Taxes

If you add a lot of income that's not subject to tax, it will have a reducing effect on your effective tax rate. Changes to the denominator are not irrelevant in the pillar to computation but they will have a much less pronounced effect than changes to the numerator. It could mean some other territories effectively picking up the tax from a credit that was oftentimes designed to influence certain types of taxpayer behavior. Right, and obviously also an important piece for policymakers.

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