Over the past decade, more than 140 nations have signed up to a historic, globally coordinated project to create an international tax regime that can meet the needs of a globalised digitalised economy – and ensure that large multinational enterprises (MNEs) pay a global minimum tax (GMT). But judging the success of the project may prove increasingly difficult.
A consensus-based, international corporate tax framework is gradually emerging and evolving. As governments, tax administrations and the world’s largest MNEs learn lessons from implementation while navigating the challenges and compromises of multilateral negotiation, the world and the shape of the project are changing.
The OECD/G20 BEPS Project to develop coherent, consensus-based, international corporate tax rules, aims to stop the practice of ‘base erosion and profit shifting’ and protect national tax bases. This collaborative multilateral approach and its ‘inclusive framework’ mark a significant shift in attitudes and approaches to international corporate tax.
Crossborder challenges
Having an ‘actual international tax regime’, rather than thousands of bilateral agreements, could be world changing, says Jason Piper, ACCA’s head of tax and business law. In the longer term, the enduring achievement of the project could be ‘the precedent that has been set for coordinated international action around taxes’.
Connections made and mechanisms developed could be applied to other crossborder issues, such as environmental taxation, says Piper. ‘We could hope to see benefits in changed business behaviour, which might endure even as the tax landscape evolves and moves on.’
Every country is approaching this in its own way, at its own pace
Time will tell. Countries have spent decades competing to attract and retain globally mobile enterprises and investment capital by lowering corporate tax rates and offering incentives, even as this tax ‘race to the bottom’ led to corporate structures and strategies that reduced tax liabilities – and revenues. Countries that are members of the OECD/G20 Inclusive Framework on BEPS have spent decades reaching consensus on the need to address this – and how.
Crafting solutions
The OECD/G20 project takes a two-pillar approach. Pillar one aims to reallocate taxing rights to market countries; Pillar Two aims to ensure that large MNEs pay at least an effective tax rate (ETR) of 15% (the present GMT) wherever economic activities take place and where value is created.
‘We have all been working intensively on the technical details and on the implementation arrangements that are necessary to make the two-pillar solution a reality,’ says Mathias Cormann, OECD secretary-general. These include a coordinated and interlocking system of instruments for governments, such as Global Anti-Base Erosion Model (GloBE) rules.
GloBE provides a framework for domestic rules that allows governments to collect ‘top-up’ taxes if a company’s effective rate in a particular jurisdiction falls below the agreed GMT. This is done through three key components: an Income Inclusion Rule, an Undertaxed Profits Rule and a Qualified Domestic Minimum Top-Up Tax.
Unevenness and uncertainty
Australia, Brazil, Hong Kong SAR of China, Indonesia, Malaysia, Qatar, Singapore and Vietnam are just some of the 30-plus jurisdictions that have written some aspects of the two-pillar solution and its GMT into tax law. Now, they and other members of the inclusive framework are at various stages on their journey towards a GMT.
Every country is approaching this in its own way, at its own pace. Areas of difference range from which rules are adopted, to how and when they are implemented; details such as deadlines for registration with national tax administrations and filing a GloBE return vary widely. National tax systems are also evolving along with the rules, and learnings from implementation.
Some types of tax incentive can trigger a potential top-up tax exposure for some MNEs in scope of GloBE rules, despite a local corporate tax rate of 15% or higher. This is driving a shift from direct tax breaks to refundable investment credits, with countries trying to keep their tax-related incentives efficient, effective and within GloBE rules – as these also shift.
Many MNEs have little choice but to go with the flow
Thorny issues
In January 2025, executive orders from US President Donald Trump made clear that the OECD rules (supported by his predecessor) would have no force or effect for the US. Negotiations followed and January 2026 brought an OECD side-by-side package that attempts to address US concerns around Pillar Two and also protect the integrity of the GMT.
‘What emerges is a version of Pillar Two with simplifications and adjustments that tax administrations and taxpayers, not limited to those in the US, may be able to benefit from,’ says Matt Brown, a Washington-based partner and crossborder tax specialist with global law firm A&O Shearman. Decisions by each jurisdiction and corporate will be factors.
The fast-changing corporate tax landscape has become a difficult place for corporates that must demonstrate compliance. Many MNEs have little choice but to go with the flow. Those that have not yet done so need to map their global structures, evaluate jurisdictional ETRs and incentives, test financing and revenue models, assess their appetite for risk and chart a way forward.
Some companies that prefer stability to unpredictability are restructuring subsidiaries so that they can consolidate taxable profits in more predictable jurisdictions. Some are utilising technology to support them on their GMT journey; ramping up their use of AI; and breaking silos to better automate, streamline and integrate tax with other finance-related processes and systems.
This can help make aspects of GMT – such as the way jurisdictions calculate ETRs, approach incentives and use country-by-country reporting – less risky for MNEs. ‘As well as addressing compliance, they are making sure that all the data that is disclosed to the public is consistent and aligned with finance processes,’ says Flora Marin, partner in the tax team at PwC in Switzerland.
No response is cost- or risk-free, however. ‘The working-hour cost of designing and operating the systems has been immense,’ says Piper. ‘This must be taken into account when assessing the success of the measures.’
But the rules are still evolving, and transitional uncertainty will last years. As Piper observes: ‘The journey from high-level political agreement to nitty-gritty detail on implemented tax return mechanisms is a long one.’
Safe harbour and CbCR
OECD details on the Simplified ETR Safe Harbour, Extension of the country-by-country reporting (CbCR) Safe Harbour and the Substance-based Tax Incentive Safe Harbour, are complex and extensive. So are their potential impacts for in scope MNEs with headquarters inside and outside the US.
