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Changing the Global Taxation Playing Field
Global tax reform is the result of a confluence of intertwining and accelerating trends, including globalization, the rise of new business models and increasing calls for a fairer tax system within an accepted global framework. It represents a historic, fundamental change to the global tax system — the most significant in over 100 years.
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The OECD’s project began in 2013, and an action plan was announced in 2015 to mitigate global profit shifting practices and promote tax transparency. The recent push for global tax reform, also known as BEPS 2.0, grew from that effort. Under the OECD/G20 IF on BEPS, participating countries and jurisdictions collaborated to develop a more inclusive framework, as overarching trends of globalized economies and digital products and services continued to proliferate. For more background on how the OECD came to this historic agreement and what companies can do to prepare, watch our short video on global tax changes.
Top Drivers of Global Tax Reform
U.S. MNEs that are in scope for either pillar of the framework may see an increase in the complexity of their tax profiles and potentially an increase in their total tax liability. Companies should scenario plan to determine the outcomes for the parts of their businesses that are subject to Pillar One and/or Pillar Two and how those outcomes may require changes in their tax strategies. They should also determine whether they need to reevaluate their business and operating models to better align with global tax policies.
While there is high-level consensus among a majority of the IF countries, there is a long road between agreement and implementation. The legislative bodies of the more than 130 individual countries that have signed on to the agreement will need to take action to enact the new rules into domestic law. The viability of the new framework will depend on each country’s implementation and enforcement of the new rules. If the U.S. stalls or fails to pass legislation to adopt the framework, or adopts a slimmed-down version of the framework, this could influence the framework’s adoption elsewhere around the world.
The latest updates and historical perspectives around the globe. April 2022 | OECD’s Pillar Two Rules Could Have Lasting Impact on Multinational Groups FEB 2022 | OECD ISSUES DRAFT RULES FOR TAX BASE DETERMINATIONS UNDER AMOUNT A OF PILLAR ONE March 2022 | BDO submission to the OECD on the public consultation document FEB 2022 | OECD ISSUES DRAFT RULES FOR TAX BASE DETERMINATIONS UNDER AMOUNT A OF PILLAR ONE DEC 2021 | EU PROPOSED DIRECTIVE FOR PILLAR TWO DEC 2021 | OECD RELEASES PILLAR TWO MODEL RULES TO BRING GLOBAL MINIMUM TAX INTO DOMESTIC LEGISLATION Nov 2021 | Global Tax: OECD announcement of agreement on International Tax Reform Oct 2021 | OECD ANNOUNCES AGREEMENT ON GLOBAL TAX REFORM Oct 2021 | REGIONAL PERSPECTIVES ON GLOBAL TAX REFORM AUG 2021 | GLOBAL TAX REFORM: WHAT CAN TAXPAYERS DO TO PREPARE FOR THE CHANGES? JULY 2021 | 131 JURISDICTIONS AGREE TO TWO-PILLAR FRAMEWORK ON GLOBAL MINIMUM TAX AND REALLOCATION OF TAXING RIGHTS June 2021 | G-20 BACKS G-7 SUPPORT FOR GLOBAL MINIMUM TAX AND NEW ALLOCATION RULES JUNE 2021 | G-7 FINANCE MINISTERS ANNOUNCE SUPPORT FOR GLOBAL MINIMUM TAX AND NEW ALLOCATION RULES DEC 2020 | BDO SUBMISSIONS TO THE OECD OCT 2020 | OECD RELEASES DIGITAL TAX BLUEPRINTS
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