On 25 July 2024 the OECD published the report prepared for the meeting of G20 Finance Ministers and Central Bank Governors held in Brazil from 25 to 26 July 2024. The report notes some recent developments in important areas of international tax involving the OECD.

Pillar Two

Pillar Two contains the rules on the global minimum tax and the subject to tax rule (STTR). Around 40 jurisdictions have already implemented or are planning to implement the global minimum tax with effect from January 2024 or 2025, with more jurisdictions taking steps towards implementation. A signing ceremony of the Multilateral Convention to facilitate the implementation of the STTR will be held on 19 September 2024.

Further important documents have been released in relation to the global minimum tax, including the Consolidated Commentary to the GloBE Model Rules, released on 25 April 2024; the fourth set of Administrative Guidance items, released on 17 June 2024; and illustrative examples on the application of the Model GloBE Rules in certain situations.

The STTR is a treaty-based rule permitting a source jurisdiction to “tax back” in a situation where the taxing rights have been given up under a tax treaty and a payment is subject to a low nominal tax rate, below 9%, in the residence jurisdiction.

Pillar One

On Pillar One, members of the Inclusive Framework are close to full consensus on the multilateral convention (MLC) to implement Amount A, which would introduce a new nexus to reallocate some taxing rights to market jurisdictions.

Amount B is the streamlined and simplified approach used to approximate the arm’s length result for baseline marketing and distribution activities. Member countries of the Inclusive Framework are working to resolve remaining details on a framework for implementation. The guidance in the Amount B report published in February 2024 has been incorporated into the OECD Transfer Pricing Guidelines. A list of countries applying Amount B will be available on the OECD website later this year.

BEPS action plan

The latest peer reviews on Action 6 were released earlier in 2024, assessing efforts to prevent tax treaty shopping and other forms of treaty abuse. So far 103 jurisdictions have signed the BEPS multilateral instrument (MLI), covering 90% of treaties between Inclusive Framework members.

On Action 13, more than 115 jurisdictions have introduced country-by-country (CbC) reporting legislation and more than 3,400 bilateral relationships have been established for the automatic exchange of information.

On BEPS Action 14 on strengthening dispute resolution mechanisms, so far 82 jurisdictions have undergone two stages of peer reviews. A full peer review process is currently being carried out to assess the progress achieved by 55 of these jurisdictions in meeting the Action 14 minimum standard. A simplified peer review process is being operated for 60 jurisdictions with limited or no MAP experience, and peer review reports for 20 jurisdictions are expected to be published soon.

Consumption tax

To date, 102 countries have implemented the internationally agreed measures to address the VAT/GST challenges of the digital economy, and another 30 countries are considering implementation of the measures. These reforms are important for developing economies, where VAT/GST is often the largest source of tax revenues and often accounts for 30% or more of total taxes. The OECD is continuing to provide comprehensive technical assistance for developing countries.

Tax policy

The forthcoming 2024 edition of the OECD report on Tax Policy Reforms: OECD and Selected Partner Economies will cover tax reforms introduced or announced during the 2023 calendar year by 90 member jurisdictions of the Inclusive Framework. The report is to be launched at the end of September 2024. During the period covered by the report, countries have further protected and broadened their domestic tax bases, increased tax rates or phased out existing tax relief. Reforms have also retained or expanded personal income tax relief to households, temporary VAT reductions or cuts to environmental excise taxes.

Tax and inequality

The Brazilian G20 Presidency commissioned the OECD to produce a report examining interactions between taxation and inequality. The focus of the report is on opportunities to enhance progressivity and the taxation of high-net-worth individuals (HNWIs). To help inform domestic policy options, the report notes that it will be important to continue analysing vulnerabilities in existing domestic and international tax systems.

Tax transparency

A new report on Strengthening International Tax Transparency on Real Estate – From Concept to Reality has been delivered to the G20 ahead of the July meeting. Technical work is continuing on advancing the exchange of readily available information on real estate transactions, holdings and income between tax administrations of interested jurisdictions. A potential architecture is being assessed to enable tax authorities to obtain fast-track access to the information contained in real estate and beneficial ownership registers.