As a result of your collective leadership, 132 out of 139 member jurisdictions of the G20/OECD Inclusive Framework on BEPS have joined our two-pillar reform to make international tax fairer and work better in the context of a globalised and digitalised economy.
This includes all G20 countries.
Since the Inclusive Framework finished meeting on 1 July, two more countries joined the consensus – Peru, and as of yesterday St Vincent and the Grenadines from the West Indies.
It’s a historic agreement which will ensure that large multinational companies pay their fair share of tax everywhere.
It brings much needed tax certainty, multilaterally agreed consistency, stability as well as increased fairness and equity to the international tax system.
As you know, under the two-pillar solution, Pillar 1 modernises century-old rules to ensure a fairer distribution of profits and taxing rights among countries with respect to the largest Multinational Enterprises, which essentially are the winners of globalisation.
Pillar 2 seeks to put a floor on tax competition on corporate income tax through the introduction of a global effective minimum corporate tax that countries can use to protect their tax bases.
Pillar Two does not eliminate tax competition, as it shouldn’t, but it does set multilaterally agreed limitations on it.
This multilaterally-agreed solution results from necessary compromises by Inclusive Framework members.
We now need to finalise the agreement by your October meeting and we need to come up with a detailed and ambitious implementation plan.
That includes model domestic legislation and a multilateral convention. The aim is to deliver the key instruments by the end of this year and the multilateral convention early in 2022.
In the post-COVID recovery, the two-pillar package will provide much needed tax revenue.
Pillar 1 is expected to reallocate taxing rights on more than USD 100 billion of profit to market jurisdictions each year.
Under Pillar 2, a global minimum tax rate of at least 15% is estimated to generate around USD 150 billion in additional global tax revenues per year.
Thanks to your continuous high level political support, you are ushering in a new international tax architecture which is based on multilateral cooperation.