The number of countries and jurisdictions that have joined the plan to reform international taxation rules, with a minimum rate of tax wherever they operate, has now reached 130.

Representing more than 90 per cent of global GDP, the countries joined the Statement establishing a new framework for international tax reform. That will update key elements of the century-old international tax system to account for a globalised and digitalised economy.

The two-pillar package – the outcome of negotiations coordinated by the OECD for much of the last decade – aims to ensure that large multinational enterprises (MNEs) pay tax where they operate and earn profits, while adding much-needed certainty and stability to the international tax system.

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.

“After years of intense work and negotiations, this historic package will ensure that large multinational companies pay their fair share of tax everywhere,” OECD secretary-general Mathias Cormann said. “This package does not eliminate tax competition, as it should not, but it does set multilaterally agreed limitations on it. It also accommodates the various interests across the negotiating table, including those of small economies and developing jurisdictions. It is in everyone’s interest that we reach a final agreement among all Inclusive Framework Members as scheduled later this year.”

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