International community strikes a ground-breaking tax deal for the digital age
The Organisation for Economic Co-operation and Development (OECD) revealed a new overhaul of the international tax system that aims at imposing a minimum 15% tax rate on Multinational Enterprises (MNEs) from 2023. The agreement is supported by all OECD and G20 countries, except Kenya, Nigeria, Pakistan, and Sri Lanka, that joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. The two-pillar solution ensures the concerns of developing countries. Under Pillar One, taxing rights on more than US$125 billion of profit are expected to be reallocated to market jurisdictions each year where developing country revenue gains are expected to be greater than those in more advanced economies, as a proportion of existing revenues. Being members of the Inclusive Framework on an equal footing, developing countries have played an active role in the negotiations and the Two-Pillar Solution contains a number of features to ensure that the concerns of low-capacity countries are addressed. ‘Today’s agreement will make our international tax arrangements fairer and work better. This is a major victory for effective and balanced multilateralism. It is a far-reaching agreement which ensures our international tax system is fit for purpose in a digitalised and globalised world economy. We must now work swiftly and diligently to ensure the effective implementation of this major reform,’ said OECD Secretary-General Mathias Cormann.