The Global Minimum Tax | Selected Issues on Pillar Two

S. 1621. Introduction

The global economic landscape is continually evolving with multinational enterprises (MNEs) playing a pivotal role in shaping economies around the world. In response to these dynamic changes, the need for a harmonized approach to international taxation has become increasingly apparent. This necessity is underscored by ongoing efforts to tackle base erosion and profit shifting (BEPS) spearheaded by the Organization for Economic Co-operation and Development (OECD).

Amid these developments, the rapid pace of digitalization has introduced challenges that necessitate a critical reassessment of existing tax frameworks. A key response to these challenges is the introduction of the Global Anti-Base Erosion (GloBE) Model Rules, referred to as Pillar Two, as agreed upon by the OECD/G20 Inclusive Framework on BEPS (IF).

Pillar Two introduces a global minimum tax designed to set a foundational tax rate on the profits of MNEs. This initiative aims to curb international tax competition and ensure a fair and level playing field in global taxation. This is achieved by imposing a top-up tax on profits arising in a jurisdiction whenever the effective tax rate (ETR) falls below the prede...