Research Paper: Impact of a Minimum Tax Rate under the Pillar Two Solution on Small Island Developing States (SIDS)

South Centre, Geneva has published my Research Paper, wherein, 36 countries comprising SIDS have been analysed, namely, Antigua and Barbuda, Bahamas, Bahrain, Barbados, Belize, Cabo Verde, Comoros, Cuba, Dominica, Dominican Republic, Fiji, Grenada, Guinea-Bissau, Guyana, Haiti, Jamaica, Kiribati, Maldives, Marshall Islands, Federated States of Micronesia, Mauritius, Nauru, Papua New Guinea, Samoa, São Tomé and Príncipe, Seychelles, Singapore, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Solomon Islands, Suriname, Timor-Leste, Tonga, Trinidad and Tobago, and Vanuatu.


In the research paper, economic profile of SIDS has been analysed on the following lines:

  • Income Category;

  • Gross Domestic Product;

  • Tax revenue (% of GDP);

  • Foreign Direct Investment;

  • External Debt Stock as a % to Gross National Income (GNI);


A further analysis of SIDS has been made in areas of domestic tax laws, membership of relevant multilateral forums, as mentioned below:

  • Corporate Income Tax and Domestic Law Provisions comprising:

  • Availability of corporate income tax (CIT) regime;

  • CIT rate;

  • Provisions for carry forward of Business Losses;

  • Provisions for grant of Incentives to attract FDI.

  • Transfer Pricing provisions in Domestic Law;

  • Inclusive Framework’s membership;

  • Implementation of Common Reporting Standard for Automatic Exchange of Information;

  • Signatories of Multilateral Competent Authority Agreement (MCAA);


The above analysis is followed-up by suitable policy suggestions in light of Pillar Two Proposals on the following lines:

  • CIT Regime and CIT rate;

  • Introduction of Qualified Domestic Minimum Top-up Tax (QDMTT);

  • Safeguarding of business entities from a foreign top-up tax under the STTR;

  • Grandfathering of on-going Tax Incentive Schemes;

  • Introduction of Transfer Pricing Legislation by jurisdictions on case-by-case basis; and

  • Implementation of Common Reporting Standard for Automatic Exchange of Information by jurisdictions which are not committed to it as of now.


It may be noted that the research paper is presented in a manner which brings clarity in understanding the Pillar Two provisions and would be useful in equal measure to tax administrations of other developing countries also which have agreed to the Pillar Two recommendations.