The two-pillar solution to address the tax challenges arising from the digitalization and globalization of the economy will lead to additional taxing rights for market jurisdictions and put a floor on tax competition through the creation of a global 15% minimum effective corporate income tax rate.
The proposed global minimum tax is now expected to result in annual global revenue gains of around USD 220 billion, or 9% of global corporate income tax revenues. This is a significant increase over the OECD’s previous estimate of USD 150 billion in additional annual tax revenues attributed to the minimum tax component of Pillar Two.
Pillar one, designed to ensure a fairer distribution of taxing rights among jurisdictions over the largest and most profitable multinational enterprises (MNEs) is now expected to allocate taxing rights on about USD 200 billion in profits to market jurisdictions annually. This is expected to lead to annual global tax revenue gains of between USD 13-36 billion, based on 2021 data.
The new estimates reflect a significant increase compared to the USD 125 billion of profits in previous estimates. The analysis finds that low and middle-income countries are expected to gain the most as a share of existing corporate income tax revenues.