On 6 October 2022 the 14th plenary meeting of the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS) was attended by delegates from more than 135 countries and jurisdictions. The meeting heard that substantial progress has been made since the agreement of October 2021 on a two-pillar solution to the tax challenges of digitalisation and globalisation, with steps being taken in 2022 towards implementation of the international tax reforms.

Progress report on aspects of Pillar One

During the meeting a new Progress Report of the Administration and Tax Certainty Aspects was issued for consultation. The document includes the rules on the administration of the new taxing right for market jurisdictions under Pillar One, and also sets out the rules for administering the tax-certainty related provisions.

Taken together with the first progress report on Amount A of Pillar One which was released for consultation in July 2022 the two documents give an overview of how the rules will be designed and how their practical operation will be implemented. The Inclusive Framework is now aiming to finalise a new Multilateral Convention for implementing Pillar One by mid-2023. The new rules are to enter into force in 2024.

Global minimum tax

Another report released by the Inclusive Framework has the title: Tax Incentives and the Global Minimum Corporate Tax: Reconsidering Tax Incentives after the GloBE Rules.

One perceived advantage of the adoption of a global minimum tax under Pillar Two is that it will reduce the need for jurisdictions to attract foreign investment through tax incentives which are often wasteful and ineffective. By imposing a global minimum tax, Pillar Two will reduce the incentive for multinationals to shift profits to lower tax jurisdictions and enable jurisdictions to attract investment through tax policy while also mobilising domestic revenues.

The additional revenues for developing countries generated by the Pillar Two provisions can be used to support economic development. They can also be used to improve the environment for foreign investors, through government spending in areas such as physical infrastructure or training to develop the skills of the labour force. In the era of the global minimum tax jurisdictions can improve their competitiveness by implementing non-tax measures to attract foreign investment.

Capacity building

The G20/OECD Roadmap on Developing Countries and International Taxation, prepared for the meeting of G20 Finance Ministers and Central Bank Governors, was released on 6 October 2022. The report noted that in response to the recommendation in the 2021 Report for regular high-level political dialogue, there have been two ministerial meetings. At these meetings ministers emphasised that developing countries should benefit from their participation in multilateral forums, and that capacity building support is important in helping developing countries to benefit from the new tax rules.

Developing countries are eliminating harmful tax practices and have gained an advantage from the exchange of information on tax rulings with other countries. However very few developing countries have access to country by country reports filed abroad. Capacity building must evolve and adjust to the requirements of developing countries, as the two-pillar solution is implemented and gives rise to new international standards.

The governance of the Inclusive Framework has been further developed by the establishment of a co-chair to help bring forward the views of developing countries. The relationships between the Inclusive Framework, the regional tax organisations and development banks has been made stronger by holding frequent events and establishing new regional initiatives.

The meeting also discussed the progress report issued by the Tax Inspectors Without Borders initiative.