On 19 February 2024 the OECD published the Secretary General’s tax report to the G20 Finance Ministers and Central Bank Governors for their meeting of February 2024. The report covered important international tax developments since their previous meeting.

Pillar Two

On 18 January 2024, the OECD updated the estimates of the revenue impact of implementing the global minimum tax, based on updated data and design features of Pillar Two. The increased effective tax rates and the reduction in profit shifting under the global minimum tax will result in increased tax revenues of between USD 155 billion and USD 192 billion globally each year. Around two-thirds of the revenue gains will be collected directly from the global minimum tax, while around one-third of the gains will arise indirectly through the reduction in levels of profit-shifting.

Subject-to-Tax Rule

Pillar Two also includes the subject-to-tax rule (STTR). This will enable developing countries to tax certain intra-group payments if these payments are subject to a nominal corporate income tax rate below 9%. The Multilateral Instrument to implement the STTR was opened for signature on 2 October 2023. The Multilateral Instrument protects the rights of developing countries to ensure that multinational enterprises pay a minimum level of tax on a range of cross-border intra-group payments, including cross-border services.

Pillar One

The Inclusive Framework released a Statement updating the timeline to finalise the text of the Multilateral Convention to implement the coordinated reallocation of taxing rights over the profits of the largest multinationals under Amount A of Pillar One).

There is continuing work to resolve the remaining differences, including with respect to the standstill on new Digital Service Taxes and other relevant similar measures.

Amount B of Pillar One

The final Amount B report was released in February 2024. The guidance will benefit low-capacity countries, many of which report that between 30% and 70% of their transfer pricing disputes relate to baseline marketing and distribution activities. The rules and the consequent changes to the OECD Transfer Pricing Guidelines will allow jurisdictions to secure revenue and preserve tax administration resources as well as providing more certainty to multinational enterprises.

Implementation of BEPS minimum standards

The Forum on Harmful Tax Practices (FHTP) has reviewed over 320 preferential regimes since the launch of BEPS action 5. Annual peer review assessments are carried out on 131 jurisdictions in relation to the compulsory spontaneous exchange of information on tax rulings under Action 5. The latest results indicate that 100 jurisdictions are fully in line with the BEPS Action 5 minimum standard, and reviews of another 31 jurisdictions have resulted in 58 recommendations to improve their legal or operational framework to identify the relevant tax rulings and exchange information.

Action 6 on tax treaty abuse

The annual Action 6 peer review shows that, as of 1 January 2024, the Action 6 minimum standard will have been implemented, or be in the course of implementation, in 90% of the tax treaties concluded between Inclusive Framework members.

Tax Administration

The Forum on Tax Administration (FTA) is working with business stakeholders and academics on the digital transformation of tax administrations. The transition to e-services, e-filing, and e-payments has significantly reduced burdens for taxpayers and supports voluntary compliance.

Global Forum

The Global Forum on Transparency and Exchange of Information for Tax Purposes now has a total of 171 member countries, the majority being developing jurisdictions. The Forum continued its peer review activities related to AEOI and EOIR standards in 2023. Also. the Forum is promoting the implementation of the newly established Crypto-Asset Reporting Framework (CARF) Standard.

Automatic exchange of information

The report notes that 125 jurisdictions have committed to implement the AEOI Standard by a specific date and 108 of them have already commenced such exchanges. During 2022 information on more than 123 million financial accounts, with a total value of over EUR 12 trillion, was exchanged automatically. In December 2023, the Global Forum published new peer reviews, and the results show high levels of compliance with the standard. Around 94% of jurisdictions have legal frameworks fully or substantially in accordance with the requirements and 64% are on track to effectively implement the standard in practice.

Exchange of information on request

So far 106 jurisdictions have been reviewed under the second round of EOIR peer reviews and 88% of jurisdictions have been rated either “Compliant” or “Largely Compliant”.