05.07.2021

130 countries joined international tax reform in response to the challenges of globalization and digitalization

130 countries joined international tax reform in response to the challenges of globalization and digitalization

The Statement was adopted within the OECD/G20 Inclusive Framework on BEPS, in which 139 countries participates. BEPS (Base erosion and profit shifting) project envisions a strategy and step-by-step movement of countries towards adopting a multilateral instrument to counter the practice of tax avoidance through the shifting of profits by multinational enterprises (MNEs) to low or no tax jurisdictions.

The framework updates key elements of the international tax system, which is no longer fit for the purpose in a globalised and digitalised 21st century economy.

The package of measures developed is the result of many years of intense consultations and negotiations coordinated by the OECD. The new measures are expected to bring certainty and stability to the international tax system in two main areas:

·      Fairer distribution of profits and taxing rights among countries with the respect for multinational enterprises to allocate taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits. Due to this, an annual redistribution of taxing rights on more than USD 100 billion in favor of market jurisdictions is expected.

·      Introduction of a global minimum corporate tax rate that countries can use to protect their tax base, invest in public services and infrastructure to recover from the crisis. The global minimum corporate income tax under the second pillar - with a minimum rate of at least 15% - is estimated to generate about $150 billion in additional global tax revenue per year. Additional benefits will also arise from the stabilization of the international tax system and increased tax certainty for taxpayers and tax administrations.

The package of measures, according to the OECD, will help to accommodate the various interests across the negotiating table, including interests of small economies and developing jurisdictions.

The participants of the process are to complete negotiation and the technical part of the work in October 2021, as well as a plan for effective implementation in 2023.

The prospects of the BEPS project are planned to be discussed at the upcoming 3rd meeting of finance ministers and heads of central banks of the G20 on July 09-10, 2021 in Venice under the chairmanship of Italy.