International: OECD Inclusive Framework majority agrees on statement on revised two-pillar framework

In brief

The OECD has announced that 130 of the 139 Inclusive Framework members have agreed to revisions to its Two Pillar Proposal that bridge the gap between the October 2020 Blueprints and the deal reached between the G7 nations last month. The 5 page statement clarifies how a revised Pillar One will be re-focused on scale (an initial threshold of EUR 20 billion revenue, with a profit margin of 10%+), whilst respecting previously agreed carve-outs for regulated financial services and extractive industries, and endorses the commitment to a global minimum tax of at least 15% under Pillar Two.


Contents

There is much to absorb from the short statement as it resolves a number of questions, but leaves many more unanswered. Critically, this proposal appears to have the endorsement of the G20 nations, China and India in particular, and so our expectation is that the G20 Finance Ministers will lend their support to the proposals following the summit in Venice next week. A long summer of work awaits for the OECD and the Inclusive Framework as they will be charged with re-drafting the Blueprints to reflect the revised terms ahead of the next G20 Finance Minister meeting in October.

There are still more challenges to come, notably 3 of the 9 dissenting members of the Inclusive Framework are EU Member States (Ireland, Estonia and Hungary) and a fourth, Cyprus, is not a member of the Inclusive Framework and has voiced concern over the global minimum tax proposal under Pillar Two. Given that the EU Commission appears to have endorsed the view that Pillar Two requires implementation via an EU Directive, a showdown on the requirement for unanimity for tax measures looks set to take place

Watch this space for more analysis and insight as we reflect on the implications of today's announcement.


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