OECD: Revenue gains from BEPS 2.0 predicted to be higher than previously expected

OECD announced that revenue gains from implementation of agreement to reform international tax system will be higher than expected

Revenue gains from BEPS 2.0 predicted to be higher than previously expected

Article Posted date 18 January 2023

The Organisation for Economic Cooperation and Development (OECD) today released a statement announcing that revenue gains from the implementation of the agreement to reform the international tax system will be higher than previously expected.

  • The proposed global 15% minimum corporate income tax is now expected to result in annual global revenue gains of around U.S. $220 billion, or 9% of global corporate income tax revenues. This is a significant increase over the OECD’s previous estimate of U.S. $150 billion in additional annual tax revenues attributed to the minimum tax component of Pillar Two.
  • Pillar One, designed to provide 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 U.S. $200 billion in profits to market jurisdictions annually. This is expected to lead to annual global tax revenue gains of between U.S. $13-36 billion, based on 2021 data. The new estimates reflect a significant increase compared to the U.S. $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.

The new estimates on the economic impact of the two-pillar solution are based on updated data and incorporate most of the recently agreed design features included in the Amount A Progress Report and the GloBE Model Rules, many of which have not been accounted for in other studies.

The update to the OECD’s earlier assessments, including its detailed Economic Impact Assessment issued in October 2020, shows that projected revenue gains under Pillar One have increased, and continue to rise over time, due to both revisions to the design of the tax reform and increased profitability of in-scope MNEs. It also shows increased projected revenue gains from Pillar Two, which reflect some increases in global low-taxed profit, including as a result of improved data coverage.

A full economic impact analysis, as well as a detailed methodology report, will be released in the coming months.

 

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