The New Year to-do list for global tax reform

05 January 2022

Last year ended with the publication of model rules for the OECD's project to achieve a global minimum corporate tax rate of at least 15%. This was the culmination of years of intensive negotiation, resulting in a deal to which 137 countries have now signed up.

To get up to speed on this, see the Macfarlanes hub page covering everything you need to know about Pillar Two of the OECD BEPS 2.0 project. 

Reaching a deal in 2021 was a major achievement, but there is plenty left on the to-do list for 2022. In the next few months we expect to see a number of developments.

  • The OECD is putting together a commentary to support the model rules and ideally this will be published early in 2022 so that businesses and tax authorities can understand how some of the rules are expected to apply in practice.
  • Public consultations are due in February and March on the implementation of the new rules.
  • Details about the subject to tax rule (STTR), which will give developing countries greater source taxing rights over certain low-taxed connected-party payments, were omitted from the December rule book. If there is still disagreement between countries on this, the OECD will need to find a way to resolve that in order to agree and implement a solution for the STTR.
  • The above points cover only Pillar Two (the global minimum corporate tax rate). The OECD project has another ambitious target - the re-allocation of profits to market jurisdictions (known as Pillar One). This is on a slower track than Pillar Two but 2022 is likely to be a key year if reform is to be achieved on Pillar One.
  • Finally - and perhaps most importantly - to meet the target of having new rules in force in 2023, the main challenge for 2022 is implementing the Pillar Two model rules across all the countries that have signed up. In some regions there is a tentative plan for this, such as a proposed Directive to implement the rules across all EU member states. But elsewhere - in particular, the US - there are real barriers to change which could prove all but impossible to overcome.  

It's going to be another whirlwind year in international tax policy. Welcome back! 

Hailed as the most important international tax reform in a century, now comes the hard part — implementing it.