The OECD Secretary General’s report to the meeting of G20 Finance Ministers and Central Bank Governors covered the following issues:

Two-Pillar International Tax Package

The Inclusive Framework has now released the text of the Multilateral Convention (MLC) to implement Amount A of Pillar One. The MLC sets out the coordinated agreement to reallocate taxing rights over a specified portion of the profits of multinational companies in excess of 10% of revenues under Amount A of Pillar One. An Explanatory Statement clarifies the application of the provisions. The MLC is also accompanied by an Understanding on the Application of Certainty (UAC) outlining details on how aspects of the Amount A tax certainty framework will operate in practice. The Convention needs to be ratified by at least 30 jurisdictions before entering into force, including the headquarters’ jurisdictions of at least 60% of the multinationals expected to be within the scope of Amount A. The MLC establishes a taxing right for market jurisdictions over a portion of the excess profit of the largest multinationals operating in their market, contains provisions to bring tax certainty to MNEs within the scope and prevents the imposition of digital services taxes and other similar measures.

The public consultation process on Amount B of Pillar One closed in September 2023 and the Inclusive Framework is now considering the feedback to further develop the framework for application of the arm’s length principle to in-country baseline marketing and distribution activities.

Pillar Two

The new Implementation Handbook on the GloBE Rules was annexed to the report to the G20 Finance Ministers. The Handbook summarises and explains the key provisions of the global minimum tax and considerations to be taken into account by tax policy and administration officials in implementing the provisions.

The Inclusive Framework has adopted the Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (STTR MLI). The STTR will allow developing countries to tax certain intra-group payments, including payments for services, where they are subject to a nominal tax rate below 9%. The source jurisdictions may impose a tax in situations where they otherwise would not be able to do so under tax treaties. The STTR MLI will allow countries to implement the STTR in existing bilateral tax treaties and it opened for signature on 2 October 2023.

Capacity building

An important priority for capacity building is to support countries in implementing the tax reforms under the two-pillar approach. Other capacity building work is performed by Tax Inspectors Without Borders (TIWB), a joint initiative of the OECD and the United Nations Development Program (UNDP), which has 66 completed and 60 current programmes across Africa, Asia and the Pacific, Eastern Europe, and Latin America and the Caribbean.

BEPS Project Implementation

The Inclusive Framework approved the seventh annual Progress Report of the OECD/G20 Inclusive Framework on BEPS outlining the key progress over the past year and this was annexed to the report to the G20 Finance Ministers. On BEPS Action 13 the OECD noted that developing countries continue to face significant challenges and many are still unable to access CbC reports filed abroad or do not have the required framework in place. Initiatives are ongoing to address this issue and facilitate access to and use of CbC reports by developing countries. In relation to Action 14 on the mutual agreement procedure, the Inclusive Framework has agreed a new Assessment Methodology for continuing the peer review process.

Tax and Crime

In July 2023, the OECD and the G20 launched a new pilot programme of the OECD Academy for Tax and Financial Crime Investigation for investigators from the South Asian region. The first training sessions have taken place in India under the new pilot programme. The Academy has an International Centre in Italy and regional centres in Argentina, Japan and Kenya, providing training to government officials from 170 jurisdictions on techniques to combat serious financial crime.

Tax and Mobility

On 27 September 2023 Inclusive Framework members met external stakeholders from business and academia to discuss international tax challenges arising from the increased mobility of individuals. The meetings focused on global mobility of workers, and issues around the mobility of high net worth individuals (HNWIs), pensioners and digital nomads.