While details of the agreement are still to be finalised, plans to close the multinational tax avoidance loophole globally is now a step closer.
Finance ministers from the Group of Twenty (G20) have announced their support to move ahead with overhauling the global corporate tax system. „After many years of discussions and building on the progress made last year, we have achieved a historic agreement on a more stable and fairer international tax architecture,“ the finance ministers said in a joint statement. The G20 finance ministers have agreed to the Organisation for Economic Cooperation’s (OECD) proposed „two-pillar approach“ that aims to ensure multinationals pay their fair share of tax in the countries they operate in, which forms the foundation of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) agreement. The two-pillar approach is one of nexus and profit allocation and another of ensuring a minimum level of taxation of at least 15%. If enacted, the plan would potentially prevent multinationals, such as Amazon and Facebook, from shifting profits offshore to low-tax jurisdictions such as Ireland or the British Virgin Islands to avoid paying tax.
