International community strikes a ground-breaking tax deal for the digital age

Major reform of the international tax system finalized at the Organisation for Economic Cooperation and Development (OECD) will ensure that Multinational Enterprises (MNEs) will be subject to a minimum 15 percent tax rate from 2023. The landmark deal, agreed by 136 countries and jurisdictions representing more than 90 percent of global GDP, will also reallocate more than USD 125 billion of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits. Following years of intensive negotiations to bring the international tax system into the 21st century, 136 jurisdictions -- out of the 140 members of the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS) -- joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. Under Pillar One, taxing rights on more than USD 125 billion of profit are expected to be reallocated to market jurisdictions each year. Developing country revenue gains are expected to be greater than those in more advanced economies, as a proportion of existing revenues. Pillar Two introduces a global minimum corporate tax rate set at 15 percent.  The new minimum tax rate will apply to companies with revenue above EUR 750 million and is estimated to generate around USD 150 billion in additional global tax revenues annually. Further benefits will also arise from the stabilization of the international tax system and the increased tax certainty for taxpayers and tax administrations.