The conduct of our businesses, and the production, distribution, sale, advertising, labeling, safety, transportation and use of many of our products, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as to foreign laws and regulations administered by government entities and agencies in countries in which we operate. Compliance with these regulations may be require us to, among other things, change our manufacturing processes or product offerings, or undertake other costly activities. In addition, we operate in an environment in which there are different and potentially conflicting data privacy and data protection laws in effect in the various U.S. states and foreign jurisdictions in which we operate and we must understand and comply with each law and standard in each of these jurisdictions. For example, the European Union’s General Data Protection Regulation, the California Consumer Privacy Act and the Brazilian General Data Protection Law, and various other privacy and data protection laws that have been passed or are pending in other countries collectively impose or will impose new regulatory data privacy and protection standards for which we must comply. These expanding privacy and data protection laws may affect our collection, processing, and cross-border transfer of consumer information and other personal data, such as in connection with our growth in the areas of direct-to-consumer sales, Internet of Things, and the digital space. Some of the laws allow for significant fines, reaching several percentage points of global corporate revenues or more. These laws and regulations may change, sometimes dramatically, as a result of political, economic or social events. Changes in laws, regulations or governmental policy and the related interpretations may alter the environment in which we do business and may impact our results or increase our costs or liabilities. Additionally, we could be subjected to future liabilities, fines or penalties or the suspension of product production for failing to comply, or being alleged as failing to comply, with various laws and regulations, including environmental regulations.
Additionally, as a global company headquartered in the United States, we are exposed to the impact of U.S. and global tax changes, especially those that affect the effective corporate income tax rate. In August 2022, the United States enacted the Inflation Reduction Act of 2022 (“the Act”), which, among other provisions, created a 1% excise tax on share repurchases and a new corporate minimum tax for certain corporations with regular corporate income tax liabilities below, in general, 15% of their consolidated GAAP pre-tax income. We do not expect the Act to have a material impact on our effective tax rate; however, it is possible that the U.S. or another jurisdiction could enact tax legislation in the future that could have a material impact on our tax rate.
The Organization for Economic Co-operation and Development (the “OECD”) is currently working on the base erosion and profit shifting 2.0 project (the “BEPS Project”), which is intended to modernize the international tax system by, among other measures, ensuring that large multinational enterprises pay a minimum level of tax in each of the jurisdictions in which they operate (such minimum tax proposal, “Pillar Two”). Pillar Two addresses the risk of profit shifting to entities in low tax jurisdictions by introducing a global minimum tax rate of 15%. In December 2021, the OECD released model rules in respect of Pillar Two (the “GloBE Rules”). If implemented in their current form by the members of the OECD/G20 Inclusive Framework on BEPS, the GloBE rules would impose a top-up tax on profits arising in a jurisdiction whenever the effective tax rate of a large multinational enterprise, determined on a jurisdictional basis, is below the 15% minimum rate. In December 2022, the European Union member states formally adopted the European Commission’s proposal for a Directive ensuring a 15% minimum effective tax rate for large multinational groups (the “Pillar Two Directive”). The Pillar Two Directive is expected to be implemented in the national law of the European Union member states by December 31, 2023. If Pillar Two (including the GloBE rules) and the Pillar Two Directive are implemented in the domestic laws of any jurisdictions in which we operate, or via international treaties entered into between such jurisdictions, we expect they would apply to our subsidiaries and could impact our consolidated effective corporate income tax rate as well as increase our tax compliance costs incurred to track and collect such taxes. Until the OECD’s proposals on Pillar Two (including the GloBE Rules), and the Pillar Two Directive for the EU member states, have been implemented under domestic laws and/or international treaties, the extent of any impact on our tax liabilities and operations cannot be determined accurately and remains uncertain.
In addition, the current domestic and international political environment, including government shutdowns and changes to U.S. policies related to global trade and tariffs, has resulted in uncertainty surrounding the future state of the global economy. Many of our most significant competitors are global companies, and in an escalating global trade conflict or the imposition of tariffs, their respective governments may impose regulations that are favorable to our competitors. The U.S. federal government may propose additional changes to international trade agreements, tariffs, taxes, and other government rules and regulations. These regulatory changes could significantly impact our business and financial performance. For additional information about our consolidated tax provision, see Note 15 to the Consolidated Financial Statements.