Since 2024, the OECD’s Global Minimum Tax (GMT), with its 15% minimum effective tax rate, has marked one of the most significant shifts in international taxation in decades. Designed to curb profit shifting and rein in harmful tax competition, the GMT aims to build a fairer, more stable global tax environment. Its objectives are widely supported, but the decision to implement these rules through an EU Directive, rather than leaving it to national governments, raises real legal, economic, and policy concerns. For all its theoretical benefits, folding the GMT into EU law risks undermining national tax sovereignty, denting competitiveness, and forcing rigid harmonization onto fundamentally diverse economies.

At its core, the GMT targets base erosion, stopping multinational enterprises (MNEs) from exploiting gaps between national tax systems to drive effective tax rates down to near zero. A global floor makes sense here: it removes the incentive for governments to race each other to the bottom through tax holidays and preferential regimes.

The GMT’s design also preserves some investment-friendly features, such as tax write-offs for start-ups’ physical equipment or employee salaries, letting states keep supporting real economic activity. In principle, then, it strikes a balance between curbing harmful practices and leaving room for legitimate tax policy.

Implementing the GMT through an EU Directive, however, is a different story, one that fundamentally shifts this balance. Taxation has traditionally been a core pillar of national sovereignty, letting Member States tailor fiscal policy to their own economic conditions. The largely one-size-fits-all approach the Directive imposes doesn’t adequately reflect the diverse economic structures, fiscal capacities, and development levels across 27 Member States, risking uneven economic outcomes. By embedding the GMT into binding EU legislation, Member States lose a degree of control over their own corporate tax systems, a particular problem for smaller or less developed economies, which often rely on tax policy as a strategic tool to attract foreign direct investment. The Directive effectively constrains their ability to compete, even where that competition might be economically justified.

The American approach is also worth considering. The United States has its own minimum tax mechanism for American multinationals operating abroad, known as GILTI, or the Global Intangible Low-Taxed Income. In simple terms, GILTI ensures that American companies pay at least a minimum level of tax regardless of where they operate, with the US government topping up any shortfall. In 2025, the G7 agreed that this American system could run alongside the OECD framework rather than being replaced by it, a so-called “side-by-side approach“, meaning the US does not need to apply the OECD’s own top-up tax mechanisms.

The practical consequence is significant. Under this arrangement, American multinationals are effectively shielded from the OECD’s enforcement tools, while EU Member States remain fully bound by all the obligations of the EU Directive implementing them. The asymmetry is stark: the US has secured a minimum tax outcome for its companies through its own rules, without subjecting them to the additional compliance burden the EU Directive imposes on European firms. Rather than a technical footnote, it represents a competitive imbalance that the EU, in its eagerness to implement the GMT through binding legislation, failed to adequately account for.

Setting national tax sovereignty aside, the EU’s early, strict adoption of GMT may create a global competitive disadvantage. The effectiveness of the GMT depends on widespread and consistent international implementation. If other major economies delay or apply the rules less rigorously, EU-based companies could face higher effective tax burdens than their global competitors. This asymmetry risks discouraging investment within the EU and could incentivize businesses to relocate activities to jurisdictions with more flexible approaches.

Another critical issue is the administrative and legal complexity associated with the GMT. The calculation of effective tax rates on a jurisdictional basis, combined with numerous adjustments and exceptions, already creates a significant compliance burden for both taxpayers and tax authorities. The addition of an EU legal layer further complicates implementation, increasing the risk of inconsistent interpretation and enforcement across Member States. This complexity may ultimately undermine the transparency and predictability that the very GMT seeks to promote.

Considering the broader constitutional framework of EU law and the CJEU’s jurisprudence, the Pillar Two Directive raises important questions regarding proportionality, subsidiarity, and the balance between EU coordination and Member State fiscal autonomy. While the objective of addressing tax base erosion is legitimate and widely supported, the use of binding EU legislation and the resulting degree of harmonisation may be viewed as extending beyond what is necessary to achieve that objective. Economically, the Directive also raises concerns about compliance costs and the potential impact on the competitiveness of multinational enterprises and investment within the EU.

The Global Minimum Tax represents an important step toward addressing profit shifting and stabilizing international taxation, yes. Its implementation through an EU Directive, however, risks creating more problems than it solves. The loss of national tax autonomy, the risk of reduced global competitiveness, the added rigidity of harmonization, and the rise in administrative complexity all point to why this approach falls short. A more flexible, coordinated, and globally balanced approach would better preserve the GMT’s intended benefits while minimizing its unintended consequences.