G7 communique on coordinated reforms of the international tax system

On June 5 2021 a Communique was released following meetings of the finance ministers and central bank governors of the G7 countries and reflects that as part of a “renewed and urgent effort towards deeper multilateral economic cooperation,” agreement was reached to support efforts through the G20/OECD Inclusive Framework to address the tax challenges arising from globalisation and the digitalisation of the economy and ensure that the largest multinational enterprises pay a global minimum tax.


In October 2020, the OECD/G20 Inclusive Framework released two “Blueprints”, reflecting the efforts made towards reaching a multilateral, consensus-based solution to the tax challenges arising from the digitalisation of the economy.  Pillar One of the OECD initiative relates to the creation of taxable nexus in jurisdictions by multinational enterprises and the corresponding allocation of taxable profits.

Pillar Two of the OECD initiative seeks to secure a comprehensive agreement on a regime for global minimum taxation that is intended to ensure that the largest multinational enterprises pay at least a minimum level of tax on their income regardless of where they are headquartered or the jurisdictions in which they operate.

The OECD held a public consultation meeting on the Pillar One and Two Blueprints on 14-15 January 2021 and is seeking to reach a global and consensus-based solution building on the Blueprints by mid-2021. 

In the meantime, the EU’s Communication on Business Taxation for the 21st Century (released on 18 May 2021) gave an overview on how the OECD’s global agreement would be implemented in the EU, with the EU Commission intending to issue two Directives to implement each of the two Pillars in EU law. 

G7 Communique

The G7 Communique signals a political consensus among the Group of Seven (which includes Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and representatives of the EU) on several key issues related to the ongoing negotiations.

  • With respect to Pillar One, the G7 Communique indicates agreement to award taxing rights to market jurisdictions of at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises.
  • Further, the G7 Communique commits to provide for appropriate coordination between the application of the new international tax rules and the removal of all digital services taxes (DSTs), and other relevant similar measures, on all companies.
  • With respect to Pillar Two, G7 finance ministers commit to a global minimum taxation rate of at least 15% determined on a country-by-country basis.
  • Significantly, the G7 finance ministers also agree on the importance of progressing both Pillars in parallel and reaching agreement at the July 2021 meeting of the G20 finance ministers and central bank governors.

Next steps

The OECD will seek to reach a global and consensus-based solution building on the Blueprints by mid-2021. The next meeting of the OECD/G20 Inclusive Framework is 30 June – 1 July 2021 and the G20 Finance Ministers and Central Bank Governors will meet in Venice on 9-10 July 2021. Technical details for both Pillars are then expected to be finalised at the G20 Rome Summit scheduled for the end of October 2021. 

KPMG in the Crown Dependencies comment

The consensus among the G7 evidenced in the 5 June 2021 Communique is a significant development that appears to increase the likelihood that broader agreement on the Pillars can be reached at the G20 level and with the full OECD/G20 Inclusive Framework. 

For the avoidance of doubt, consensus at the OECD on a global minimum taxation regime under Pillar Two would not compel jurisdictions such as the Crown Dependencies to modify their corporate tax rates. The proposal instead contemplates agreement on a set of coordinated measures designed to top-up the tax on cross-border income that falls below the agreed minimum tax. The top-up tax could be imposed by either the jurisdiction in which the parent company of an entity is located (through an “income inclusion regime”) or by a jurisdiction from which deductible payments are made (through an “undertaxed payments rule”).   

As noted above, the technical details are expected to be finalised by the G20 Summit in Rome later this year, however under current proposals Pillar Two would only apply to the largest multinational enterprises (with consolidated group revenue of at least €750m) and contains exemptions for investment funds, pension funds and governmental entities (such as sovereign wealth funds).

The Crown Dependencies, as members of the OECD/G20 Inclusive Framework, have actively participated in discussions on the design of the Pillars since their inception and, irrespective of the conclusions ultimately reached, remain focused on offering a stable, transparent and well-regulated business environment.

If you would like to discuss the potential implications of these developments in more detail or how they might impact your business, please do not hesitate to get in touch with any of the individuals listed or your usual KPMG contact.