The two-pillar package aims to ensure that large multinational corporations (MNEs) pay taxes where they operate and make profits, while providing the international tax system with much-needed security and stability.
 pay taxes where they operate and make profits, while providing the international tax system with much-needed security and stability.</p>
<p>The first pillar will ensure a fairer distribution of profits and taxation rights between countries in relation to the largest MNEs, including digital companies. It would shift some taxation rights on MNEs from their home countries to the markets where they do business and make profits, regardless of whether companies are physically present there.</p>
<p>The second pillar aims to eliminate corporate tax competition by introducing a global minimum corporate tax rate that countries can use to protect their tax bases.</p>
<p>OECD Secretary General Mathias Cormann said: “After years of intense work and negotiation, this historic package will ensure that large multinational corporations everywhere pay their fair share of taxes. This package does not eliminate tax competition as it should not, but it does set multilaterally agreed limits on it. It also takes into account the various interests at the negotiating table, including those of small economies and developing countries. It is in everyone’s interest that we reach a final agreement among all members of the Inclusive Framework this year as planned. “</p>
<p>The remaining technical work on the two-pillar approach should be completed by October 2021. The tax reform is to be implemented from 2023.</p>
<p>The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and regularly writes news on transfer pricing and international tax law. Alex can be reached at editor@transferpricingnews.com</p>
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The two-pillar package aims to ensure that large multinational corporations (MNEs) pay taxes where they operate and make profits, while providing the international tax system with much-needed security and stability.