A step forward in global tax cooperation
Ending bank secrecy, establishing a global minimum tax and curbing tax avoidance are all achievements that stem from effective multilateral cooperation, which must be sustained to tackle challenges posed by digitalisation and inequality
Over the past almost two decades, thanks to the G20’s leadership and the committed engagement of the Organisation for Economic Co-operation and Development–hosted Inclusive Framework on Base Erosion and Profit Shifting and the Global Forum on Transparency and Exchange of Information for Tax Purposes, we have seen an acceleration in the pace and scale of multilateral cooperation in tax matters, leading to significant reforms that have reshaped the international tax landscape and produced concrete results.
Effective collaboration has led to the end of bank secrecy and to the introduction of new anti-abuse measures and the reinforcement of existing ones to deal with tax avoidance, tax evasion and other illicit financial flows. It has also led to the establishment of new global standards including guidelines for value-added or goods and services taxes and, most recently, the establishment of a global minimum tax that sets a floor for taxation to neutralise distortions, increase tax revenues and reduce opportunities for tax avoidance.
Inclusive tax systems
A defining feature of this multilateral cooperation has been the increasing focus on inclusivity. Since its launch in 2016, the Inclusive Framework has grown from 82 members to 147 members, with interest in joining remaining strong. Similarly, the Global Forum has grown to 171 members.
Tax transparency has been a stalwart of multilateral efforts to coordinate on tax, since G20 finance ministers endorsed a crackdown on bank secrecy in 2009 and agreed to implement transparency standards through the Global Forum. This work has since unlocked over €130 billion of additional revenues, of which €45 billion has been identified in developing countries. Transparency standards continue to evolve, including through the recent Crypto-Asset Reporting Framework, developed in response to a G20 mandate.
The BEPS project, which followed on from initial transparency efforts, was driven by the recognition among governments that international rules and standards needed to be modernised and adapted to the rapid digitalisation and globalisation of the economy. Finalised in 2015, the BEPS project was launched by diagnosing the vulnerabilities in the existing system that enabled base erosion and profit shifting. It has generated tangible and significant results.
In recent years, the priority of the Inclusive Framework has been the implementation of the Two Pillar Solution to address the tax challenges arising from the digitalisation of the economy, agreed in October 2021.
Under Pillar Two, the global minimum tax – the “resounding success of international taxation cooperation” – is now a reality. Around 40 jurisdictions have implemented or will implement the global minimum tax taking effect in 2024, and over 20 jurisdictions are taking concrete steps towards implementation as of 2025 or later.
The first signing ceremony of the multilateral instrument for the Subject to Tax Rule, which enables developing countries to tax intra-group payments subject to low nominal rates in a treaty partner’s jurisdiction, took place on 19 September 2024. The ceremony included 57 jurisdictions participating, and 19 countries or jurisdictions signed the instrument, or a letter of intent to do so as soon as possible.
In July 2024, G20 finance ministers encouraged Inclusive Framework members to expeditiously complete the negotiations on a final package on Pillar One.
Today, the text of the Multilateral Convention to Implement Amount A of Pillar One is relatively stable and has secured nearly full consensus across the full membership of the Inclusive Framework.
Most of the remaining work at the Inclusive Framework is refining the consensus on Amount B. It provides enhanced tax certainty by defining a simplified and streamlined transfer pricing approach that applies to a broad scope of baseline marketing and distribution activities.
It takes time to build consensus on such transformational changes, and consensus is the foundational ingredient for effecting change and delivering certainty. Delegates remain committed to finishing this work and the level of consensus achieved to date is meaningful.
Future focus areas
As we transition more fully to the implementation phase of the work on BEPS and the Two Pillar Solution, delegates and stakeholders are reflecting on additional areas that could benefit from international collaboration. In the July 2024 Rio de Janeiro G20 Ministerial Declaration on International Tax Cooperation, G20 finance ministers encouraged the Inclusive Framework to focus on inequality. This is an area where the OECD has already done significant policy work and we look forward to supporting the Inclusive Framework in further exploring root causes and policy solutions.
Other areas of focus include the tax implications of global mobility, the implications of artificial intelligence, and simplifying and rationalising international rules post minimum tax, as well as ongoing work on climate, tax transparency, tax certainty, tax administration and development.
As we look to the future, we will continue to build on the lessons from these achievements to date, and work more collaboratively with stakeholders, to further our collective efforts to achieve a fair and inclusive tax system.
