On 1 July, the Organisation for Economic Co-operation and Development (OECD), issued a statement about a new two-pillar plan to reform international taxation rules.
They announced that 130 countries and jurisdictions had agreed to the plan which aims to ensure that Multinational Enterprises (MNEs) pay a fair share of tax wherever they operate.
Pillar One will ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs including digital companies. It would re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there.
Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases. A minimum rate of at least 15% is estimated to generate around $150 billion in additional global tax revenues annually.
Participants in the negotiation have set an ambitious timeline for conclusion of the negotiations. This includes an October 2021 deadline for finalising the remaining technical work on the two-pillar approach, as well as a plan for effective implementation in 2023.
Source: OECD