Beps could increase global tax by $80bn a year

The OECD has released a economic impact analysis on the proposed Beps changes.

According to the analysis the two pillars of Beps would directly add between $50-80bn to global corporate income tax (CIT) revenue.

The follow on effect of the reforms could add even more, up to $100bn in total, but the report warned that the increase in CIT would depend on a number of factors.

“Taking into account the combined effect of these reforms and the US GILTI regime, the
total effect could represent $60-100bn per year or up to around 4% of global CIT revenues,” the OECD said.

“The exact gains could differ from these ‘ex ante’ estimates as they would depend on the final design and
parameters of Pillar One and Pillar Two, the extent of their implementation, the nature and scale of
reactions by MNEs and governments, and future economic developments.”

Beps has been divided into two pillars of changes, to be implemented in stages.

The first pillar would establish new international tax rules, detailing where tax should be paid and create a “fundamentally new” way to share taxing rights.

“The aim is ensure that digitally-intensive or consumer-facing Multinational Enterprises (MNEs) pay taxes where they conduct sustained and significant business, even when they do not have a physical presence, as is currently required under existing tax rules,” the OECD said.

The second pillar would introduce a global minimum tax that would “help countries around the world address remaining issues linked to base erosion and profit shifting by MNEs.”

According to the analysis, pillar one would lead to a “modest” increase in global tax revenues.

“On average, low, middle and high income economies would all benefit from revenue gains, while
‘investment hubs’ would tend to lose tax revenues,” the report states.

The second pillar however would have the bigger impact, adding a “significant increase” to CIT.

“Up to 4% of global corporate income tax (CIT) revenues, or $100bn of revenue gains annually, could result from implementation of the global minimum tax under Pillar Two. The analysis also shows that a further $100bn could be redistributed to market jurisdictions through Pillar One plans to ensure a fairer international tax framework,” the OECD said.

The OECD has also released reports on the blueprints on the implementation of the two pillars, and put the plan out for public consultation.

The two blueprints detail how the two pillars of Beps would work and asks for public feedback.

A statement from the OECD said that there has been “substantial progress towards reaching a consensus-based long-term solution” when it comes to Beps.

A two pillar approach to Beps, that has been in discussion since 2019, has now been agreed to by the OECD/G20 Inclusive Framework on Beps group.

8 November 2022
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