OECD: Statement of Inclusive Framework on two-pillar solution addressing tax challenges of digital economy

130 member jurisdictions have agreed to a detailed implementation plan together with remaining issues that will be finalised by October 2021.

130 member jurisdictions have agreed to a detailed implementation plan

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) today released a statement concerning a two-pillar solution to address the tax challenges arising from the digitalisation of the economy.

According to the OECD statement [PDF 174 KB], 130 member jurisdictions have agreed to a detailed implementation plan together with remaining issues that will be finalised by October 2021.

The agreement indicates the Inclusive Framework members aim for “a robust global minimum tax” with a limited impact on multinational entities (MNEs) carrying out real economic activities with substance. There is an acknowledgement that there is a direct link between the global minimum effective tax rate and the carve-outs, and the agreement  includes a commitment to continue discussions in order to take a final decision on these design elements within the agreed framework by October 2021. Excluding MNEs in the initial phase of their international activity from the application of the global minimum tax will also be explored.

The U.S. Treasury Department released a statement noting the agreement by the 130 countries to support a global minimum tax for MNEs, and observing:

… For decades, the United States has participated in a self-defeating international tax competition, lowering our corporate tax rates only to watch other nations lower theirs in response. The result was a global race to the bottom: Who could lower their corporate rate further and faster?

No nation has won this race. Lower tax rates have not only failed to attract new businesses, they have also deprived countries of funding for important investments like infrastructure, education, and efforts to combat the pandemic. In the United States, this agreement will ensure that corporations shoulder a fair share of that burden.

Today’s agreement by 130 countries representing more than 90 percent of global GDP is a clear sign: the race to the bottom is one step closer to coming to an end. 

 

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