Revenue gains to be higher than expected post international tax reform

The two-pillar solution to address the tax challenges arising from the digitalisation and globalisation of the economy will lead to additional taxing rights for market jurisdictions and put a floor on tax competition through the creation of a global 15 per cent minimum effective corporate income tax rate.

Pillar One, designed to ensure a fairer distribution of taxing rights among jurisdictions over the largest and most profitable multinational enterprises (MNEs) is now expected to allocate taxing rights on about $200 billion in profits to market jurisdictions annually. This is expected to lead to annual global tax revenue gains of between $13-36 billion, based on 2021 data.

The new estimates reflect a significant increase compared to the $125 billion of profits in previous estimates. The analysis finds that low and middle-income countries are expected to gain the most as a share of existing corporate income tax revenues.

“The international community has made significant progress towards the implementation of these reforms, which are designed to make our international tax arrangements fairer and work better in a digitalised, globalised world economy,” said OECD secretary-general Mathias Cormann. “This new economic impact analysis again underlines the importance of a swift, efficient, and widespread implementation of these reforms to ensure these significant potential revenue gains can be realised. Widespread implementation will also help stabilise the international tax system, enhance tax certainty, and avert the proliferation of unilateral digital services taxes and associated tax and trade disputes, which would be bad for the global economy and economies around the world.”

ALCHEMPro News Desk (NB)