Tag Archive: Pillar Two

1. The Global Minimum Tax Deal Under Pressure – Is the US Holding It Back?

   30 March 2025 4:06 am Leave a Comment

   Global Minimum Tax Deal Under Pressure – Introduction

   Just when the world thought it was on the cusp of a global tax breakthrough, cracks are beginning to show.

   The landmark OECD agreement aimed at overhauling how multinational companies are taxed is facing renewed opposition – and much of the resistance is coming from the United States.

   This could have major implications for how, when, and even if the deal is implemented.

   What Is the Global Tax Deal?

   The OECD’s two-pillar framework was designed to tackle tax avoidance and ensure large multinationals pay a fairer share of tax, wherever they operate.

   Pillar One reallocates taxing rights so market countries can tax a portion of profits.

   Pillar Two introduces a global minimum corporate tax rate of 15% for companies with annual revenues above €750 million.

   Over 135 countries, including the US, have committed in principle. But turning that agreement into domestic law is proving to be the real challenge.

   Why Is the US Wavering?

   Although the Biden administration supported the OECD framework, political realities have changed.

   With a divided Congress and strong Republican opposition, passing necessary legislation has become difficult.

   Critics in the US argue that the global minimum tax could hurt American competitiveness by effectively outsourcing tax sovereignty.

   There’s also concern that other countries are implementing Pillar Two but dragging their feet on Pillar One – potentially putting US firms at a disadvantage.

   Impact on Global Progress

   US hesitancy could derail the entire project.

   Other countries, particularly in the EU and Asia, are moving forward with minimum tax rules.

   If the US doesn’t follow suit, it undermines the whole concept of a level playing field.

   There’s also a risk that disputes over digital taxes, which Pillar One was supposed to resolve, could flare up again if countries lose patience with the OECD timetable.

   What Happens Next?

   All eyes are now on the US Congress and upcoming elections.

   Without US implementation, the deal lacks weight — and countries may return to unilateral measures like digital services taxes.

   This would be a setback for international cooperation and tax certainty.

   Global Minimum Tax Deal – Conclusion

   The global tax deal was a diplomatic achievement, but its future is far from guaranteed.

   If the US backs away or delays indefinitely, other countries may rethink their own commitments — and the dream of a fairer global tax system could stall once more.

   Final thoughts

   If you have any queries about this article on the global minimum tax, or tax matters in the United States then please get in touch.

   Alternatively, if you are a tax adviser in the United States and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.

2. EU agreement on Pillar Two / Minimum Taxation Directive

   2 January 2023 10:18 am Leave a Comment

   Introduction – EU agreement on Pillar Two

   Eventually, after a number of failed attempts, the EU has reached agreement on the Minimum Taxation Agreement.

   The 27 European Union Member States reached agreement on the 12 December 2022.

   The agreement clears the way for the implementation of a minimum level of taxation for the largest companies. These reforms are also known as the Pillar Two or Minimum Taxation Directive.

   The Directive has to be transposed into Member States’ national law by the end of 2023.

   What is it?

   Broadly, the agreed Directive reflects the global OECD agreement with some adjustments.

   The new agreement will apply to any large group of companies whether domestic or international. The rules will apply to such organisations with aggregate revenues of over €750 million a year. As such, it will only apply to the biggest companies around the globe.

   It should be noted that it is necessary for either the parent company or a subsidiary of the group to be situated within the EU.

   The rate of the minimum tax

   The effective tax rate is established for a location by dividing the taxes paid by the entities in the jurisdiction by their income.

   Where this calculation results in a rate of tax below 15% then the group must ‘top-up’ the tax paid such that the overall rate is 15%.

   What’s next?

   The development means that the EU will be a pioneer around Pillar Two. However, it seems highly likely that other jurisdictions (I.e non-EU) will follow suit.

   Further, by the end of this month (Jan 2023), it is expected that the OECD will publish its own guidelines for Pillar Two. Again, these should act as a catalyst for wider adoption of Pillar Two internationally.

   In addition, it is expected that they will shed some light on some of the key outstanding issues around how the US rules (such as US GILTI rules) will conform with Pillar Two.

   If you have any queries about the EU agreement on Pillar Two, or international tax matters generally, then please do not hesitate to get in touch.

   The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article