• Global Tax Reform

    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.



  Global tax reform comes after years of discussion and negotiations to address the tax challenges arising from the digitalization of the economy.


  The Organisation for Economic Cooperation and Development (OECD) announced that 136 countries have reached agreement on its two-pillar framework for global taxation in 2021 and will request a phased implementation approach during 2023 and 2024.


  Now that the OECD has released the final framework, those countries will begin the process of enacting legislation and revising their treaty networks to align with the framework.


  U.S.-based multinational enterprises (MNEs) should review the final framework and assess the potential impact to their business, as well as monitor its implementation in all the countries in which they operate.

The OECD will develop implementation guidance for Inclusive Framework (IF) countries, a group of countries collaborating on ways in which to address Base Erosion and Profit Shifting (BEPS), to follow for aligning their tax laws with the framework. The Pillar One proposal calls for implementation through a multilateral instrument that would be developed and signed by IF countries in 2022, for implementation in 2023.  





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

Greater tax transparency, Digitization, Disparity in taxation systems, Rise of new business models, Globalization


  Pillar One Pillar Two
Summary This changes some nexus and profit allocation rules for taxation.
The signatories to the IF statement committed to provide the necessary coordination between the new rules and the removal of all digital service taxes.
This attempts to stop the “race to the bottom” by jurisdictions lowering their corporate income tax rates. Pillar Two establishes a global corporate minimum tax rate of 15%.
In-scope MNEs Threshold:
Global revenue above EUR 20 billion and profitability above 10%.
That threshold could be reduced to EUR 10 billion upon review seven years after the agreement enters into force.
Global revenue above EUR 750 million.
Out-of-scope Industries
  • Extractive industries
  • Regulated financial services
  • International shipping
  • Government entities
  • International organizations
  • Nonprofit organizations
  • Pension funds or investment funds that are ultimate parent entities of an MNE group or any holding vehicles used by such entities, organizations or funds


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.


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