KPMG report: The diverging paths of Pillars One and Two

A KPMG report that explores the pillars’ status and considers what might come next

A KPMG report that explores the pillars’ status and considers what might come next

In October 2021 the OECD inclusive framework on base erosion and profit shifting (BEPS) claimed victory in its effort to address the tax challenges arising from the digitalization of the economy by reaching agreement on a two-pillar solution. 

Pillar One would change the way taxing rights over the largest, most profitable multinationals are allocated among countries, while Pillar Two would introduce globally coordinated minimum effective tax rules.

Political considerations meant the two pillars have always been presented as a package deal. Some countries wanted to change where big businesses (primarily U.S. tech companies) paid taxes; others wanted to introduce minimum effective tax rules. So, the OECD put together a package with both. In October countries agreed that the two pillars should be implemented together, and come into effect in 2023.

However, in recent months, it has become increasingly apparent that the pillars’ paths are diverging. The OECD has published model rules and commentary that give countries the main tools they need to introduce Pillar Two but has yet to reach a similar agreement on Pillar One.

Read a July 2022 report* [PDF 305 KB] prepared by KPMG LLP that explores the pillars’ status and considers what might come next. 

*Originally appearing in Tax Notes International (July 4, 2022) and reprinted with permission of the publisher.


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