Achieving Global Tax Equity: Unveiling the Historic Global Tax Deal

July 17, 20230



In a landmark development for global taxation, 138 countries and jurisdictions have come together to agree on a historic milestone in the form of a global tax deal. This agreement marks a significant step towards establishing a more equitable and transparent international tax framework. The deal, reached after years of negotiations, aims to address the challenges posed by multinational corporations’ tax practices and ensure a fairer distribution of profits. 

On 12th July 2023, an Outcome Statement was agreed upon by 138 country members of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS). This statement acknowledges the significant progress made and paves the way for a historic and major reform of the international tax system. The reform, known as the Two-Pillar Solution, aims to ensure a more equitable distribution of profits and taxing rights among countries and jurisdictions concerning the world’s largest Multinational Enterprises (MNEs). 


The Pillars of the Global Tax Deal: 


The first pillar focuses on the reallocation of taxing rights, particularly for highly profitable multinational corporations. Under this pillar, a portion of the profits generated by these companies will be redistributed to the countries where they operate, regardless of whether they have a physical presence or not. This approach aims to prevent profit shifting and ensure that companies are taxed where they generate their revenue. 

The second pillar of the agreement aims to establish a global minimum tax rate. This measure intends to curb tax competition among countries, often resulting in a race to the bottom, where countries lower their tax rates to attract multinational corporations. By setting a minimum tax rate, the deal seeks to create a level playing field and prevent erosion of the global tax base. 


Key Takeaways of the Global Tax Deal:  


The Outcome Statement, resulting from 20 months of intense technical negotiations, reflects the collaborative efforts and compromises made by all participating jurisdictions, irrespective of their size or development status. The agreement summarizes the package of deliverables that have been developed to address the remaining elements of the Two-Pillar Solution. 

Among the outcomes of the agreement are the deliverables, which encompass the text of a Multilateral Convention (MLC). This MLC enables jurisdictions to redistribute and assert their authority to tax a portion of residual profits generated by Multinational Enterprises (MNEs) within their domestic borders. The finalized text of the MLC will be published once it has been prepared for signature, pending resolution of specific concerns raised by a few jurisdictions. Additionally, a proposed framework for the simplified application of the arm’s length principle to in-country marketing and distribution activities (Amount B of Pillar One) is open for stakeholder input before finalization. 

The Subject-to-Tax Rule (STTR) and its implementation framework are also part of the deliverables. The STTR enables developing countries to update their bilateral tax treaties to ensure income from certain intra-group transactions is subject to taxation, especially if it is subject to low or nominal taxation in the other jurisdiction. Furthermore, the OECD will prepare a comprehensive action plan to facilitate the coordinated implementation of the Two-Pillar Solution in collaboration with regional and international organizations. 

A significant pledge outlined in the Outcome Statement is that the 138 countries and jurisdictions have committed to abstain from implementing recently introduced digital services taxes or comparable measures on any company until 31st December 2024. This commitment also extends to the period until the Multilateral Convention (MLC) becomes effective, provided that the signature process of the MLC demonstrates satisfactory progress by the year’s end. This commitment recognizes the progress made thus far and aims to avoid any disruptions or delays in the ratification of the MLC. 

The Outcome Statement will be presented to G20 Finance Ministers and Central Bank Governors during their meeting in Gandhinagar, India on 17-18 July. Simultaneously, technical work will continue to open the MLC for signature in the second half of 2023, with a signing ceremony planned by the end of the year. Further work on Amount B of Pillar One will commence with a public consultation and is expected to be completed by the end of the year. The documentation related to the STTR will be published next week, and the Multilateral Instrument implementing the STTR will be released for signature starting from 2nd October 2023. 




The agreement reached by 138 countries and jurisdictions on a global tax deal is a remarkable achievement in the pursuit of fair and equitable international taxation. By addressing profit shifting and establishing a minimum tax rate, this historic milestone aims to create a more transparent and balanced global tax framework. The deal offers numerous benefits, including increased tax revenue, enhanced tax transparency, and economic stability. However, successful implementation and monitoring will be crucial in ensuring the deal’s effectiveness. As countries move forward to enact domestic legislation, the global tax deal paves the way for a more cooperative and sustainable approach to global taxation. 


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