Latest News, MEIG Highlights 4 janvier 2022

Highlight 1/2022 – Historic agreement on international corporate taxation

Olya Krylova, 4 January 2022

Source: OECD

International taxation is usually governed by bilateral tax treaties and there is no global body with the authority to tax private undertakings. Both the United Nations (UN) and the Organization for Economic Cooperation and Development (OECD) provide model tax treaties that are used as the basis for many of the bilateral deals. World Trade Organization (WTO) rules only apply in cases where taxes are found to be subsidizing exports  or discriminating against imported goods. Thus, the power to tax private undertakings is essentially a sovereign right of the State.

Yet, the Rome’s G20 Summit has constituted a historical shift in the international taxation of multinational companies. Leaders of the world’s 20 major economies agreed to enforce a corporate tax rate of at least 15% and a fairer system of taxing profits where they are earned. The tax deal was proposed by the United States and the key elements of the reform were developed by the OECD/G20 Inclusive Framework. The pact was agreed by all the leaders attending the G20 summit in Rome on 30-31 October 2021. As a result, 137 countries joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy. Following this statement, countries aim at signing a multilateral convention in 2022, with effective implementation in 2023. The convention is already under development, and it is expected to hit digital giants like Amazon and Facebook, as the tax will affect firms with global sales above € 20 billion.

So, what is the corporate tax really about? The reform adopted during the G20 Summit is composed of two main pillars:

  1. Pillar One aims at adapting international rules on how the taxation of corporate profits of the largest and most profitable multinational enterprises is shared amongst countries. The objective is to reflect the changing nature of business models, including the ability of companies to do business without a physical presence.
  2. Pillar Two aims at ensuring that multinational companies are subject to a minimum effective tax level on all their yearly profits. The agreement envisages a redistribution of excess profits to markets where consumers are located.

The agreement reached in the G20 Summit is groundbreaking. President Biden affirmed“here at the G20, leaders representing 80% of the world’s GDP – allies and competitors alike – made clear their support for a strong global minimum tax. This is more than just a tax deal – it is diplomacy reshaping our global economy and delivering for our people.” The OECD estimates that the deal could bring an extra  $ 150 billion of tax per year , bolstering economies as they recover from COVID-19. It would be reasonable and fair to invest that money into environmental projects or to relocate it to developing countries, as a compensation for harmful manufacturing practices of multinational companies. Although the significance of this measure is undeniable, the most difficult step remains in the implementation of this instrument. Hence, the practice of international corporate taxation remains open and future developments will indicate whether the agreement reached by world leaders goes beyond a mere political declaration.

Olya Krylova, Highlight 1/2022 – Historic agreement on international corporate taxation, 4 January 2022, available at

The views expressed in the MEIG Highlights are personal to the author and neither reflect the positions of the MEIG Programme nor those of the University of Geneva.


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