The Global Tax Deal refers to the two-pillar agreement reached through the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), endorsed by more than 130 jurisdictions in October 2021. It is the most significant overhaul of international corporate tax rules in a century, designed to address tax challenges arising from digitalisation and aggressive profit shifting by multinational enterprises (MNEs).
The deal rests on two pillars:
- Pillar One reallocates a portion of taxing rights over the largest and most profitable MNEs (broadly those with global revenue above €20 billion and profitability above 10%) to market jurisdictions where their users and customers are located, regardless of physical presence. It is intended to replace unilateral digital services taxes.
- Pillar Two introduces a global minimum effective corporate tax rate of 15% on MNEs with consolidated revenue above €750 million, enforced through interlocking rules: the Income Inclusion Rule (IIR), the Undertaxed Profits Rule (UTPR), and a Qualified Domestic Minimum Top-up Tax (QDMTT). If profits in any jurisdiction are taxed below 15%, other countries can collect a "top-up" tax.
Pillar Two began taking effect in many jurisdictions from 1 January 2024, including across the European Union (under Council Directive 2022/2523), the United Kingdom, South Korea, Japan, Canada, and Australia. Pillar One has faced delays, with negotiations on its Multilateral Convention continuing past original deadlines.
The deal has been controversial. The United States, despite the Biden administration's central role in brokering it, has not enacted implementing legislation; the Trump administration in January 2025 issued an executive order declaring the deal has "no force or effect" in the US and threatening retaliatory measures against countries applying the UTPR to American firms. Developing-country blocs have also pushed for negotiations to move to the UN, leading to the 2023 General Assembly resolution launching a UN Framework Convention on International Tax Cooperation.
Example
In December 2022, EU member states unanimously adopted Directive 2022/2523 to implement the Pillar Two 15% minimum tax across the bloc starting in 2024.
Frequently asked questions
Over 130 jurisdictions in the OECD/G20 Inclusive Framework endorsed the October 2021 statement, including all G20 members, EU states, and many developing economies.
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