On 1 July 2021, the OECD issued a statement setting out its two-pillar plan to reform international corporate tax. To date, 136 jurisdictions have committed to the proposal, including all members of the G20.

Pillar one proposes a transfer of a portion of the taxing rights to large global businesses from the jurisdiction in which the business is resident to the jurisdiction(s) in which economic value is created. This provision will apply to the world's largest businesses with global sales of more than EUR 20 billion. It is expected that 25% of profits exceeding a 10% threshold will be reallocated and taxed in jurisdiction(s) where the business's customers who use and consume its goods and services are based.

Pillar two, known as the global anti-base erosion mechanism (GloBE) proposes a 15% minimum level of global tax on businesses with a consolidated revenue of EUR 750 million. These businesses must pay a minimum effective tax rate of 15% on profits in all countries.

The OECD's proposal originates from the work it has previously done on the taxation of global digital businesses, which sought to ensure that profits are taxed where economic value is created. Up until the 1 July 2021, global agreement had proven difficult to reach, with the US reluctant to disrupt its global digital businesses. The deadlock led several jurisdictions to introduce their own initiatives for national taxes on digital companies, many of which include ‘sunset clauses’ and expire if an agreement is reached at international level. Whilst the OECD's proposal is not exclusively limited to digital profits and various carve-outs have been negotiated, many of the world's largest digital businesses will fall within its scope. Pillar one requires countries to withdraw their unilateral measures for digital companies and not introduce new ones.

Although there is still significant work to be done, the OECD's proposal marks a historic moment in international corporate taxation and is the closest we have ever come to international agreement. The OECD intends to finalise a detailed implementation plan by October 2021 and implement a legislative framework during 2022. The proposal is intended to take effect from 2023.