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For Immediate Release


Clark Gascoigne

Phone: (202) 813-0290


Press Release

Global Tax Deal Advances, But Questions Persist

While OECD Framework is Historic, Certain Process and Proposed Revenue Allocation Details Raise Political Viability Concerns

A revised and “more final” two-pillar framework to create a global agreement on the taxation of multinational enterprises (MNEs) in a more digitalized and global economy was made public today (the Framework), further advancing efforts under the Organization for Economic Cooperation and Development’s (OECD’s) Inclusive Framework. While the Framework represents a paradigm shift in the way that MNEs are taxed—allocating the right to tax certain excess profits of very large MNEs to “market” jurisdictions and creating a global minimum corporate tax— Friday’s Framework raises concerns about the long-term political viability of this two-pillar global tax solution.

“This OECD framework represents a critical opportunity to begin to dismantle U.S. and international systems of tax dodging and financial secrecy that exacerbate inequality, lead to corruption and undermine our national security, democracy, and tax base,” said Ian Gary, Executive Director of the Financial Accountability and Corporate Transparency (FACT) Coalition. “Without heeding the calls of developing countries to more equitably share in the revenues raised by implementation of the agreement, though, the political viability of a final agreement over time may be in doubt.”

The Framework comes on the heels of the Pandora Papers being released by an investigative journalist consortium over the weekend, exposing anew the ways in which the very wealthy, world leaders, and MNEs are able to participate in a separate and secretive “offshore” financial economy. This facilitates tax evasion, corruption, and illicit financial flows, and robs governments of the funds needed to respond to global challenges like persistent inequity, climate change and the COVID-19 pandemic.

“The world can’t have two systems – one for hardworking people who pay their taxes, and the other for the global rich and multinational corporations who don’t,” said Gary. “Multinationals and global elites are using offshore financial secrecy and perverse results of a global tax race to the bottom to dodge taxes and escape accountability, and it’s encouraging to see collective action that addresses these concerns.”

Friday’s Framework advances an earlier, incomplete framework from July that 136 of 140 Inclusive Framework jurisdictions have joined, including early holdouts Ireland, Estonia, and Hungary. Among other open questions answered from July, the Framework indicates that 25% of the excess profits (that is, in excess of profit margins of 10%) of the world’s largest MNEs will be reallocated among market jurisdictions to afford taxing rights based on the location of consumption or use of goods or services under Pillar 1. Local digital service taxes must be removed and no new such taxes may be implemented until the earlier of 2024 or the implementation of Pillar 1 via a multilateral convention.

Further, the Framework more definitively creates a 15% minimum global corporate tax rate for large MNEs under Pillar 2 (removing language from the July framework that indicated a rate of “at least” 15%). The minimum tax works by allowing headquarter countries of MNEs to impose a “top-up” tax on low-taxed income of constituent entities on a country-by-country basis (called, the Income Inclusion Rule or IIR), and it is made clear that the U.S. global intangible low-taxed income (GILTI) tax will likely not comply with this standard unless it is amended to apply on a country-by-country basis (as is currently being proposed by the President and the Build Back Better Act). An undertaxed payment rule (UTPR) denies deductions or requires an equivalent adjustment for low tax income of a constituent entity that is not subject to tax under an IIR, and is subject to certain extended transition periods for MNEs with more limited foreign activities. Additional details were also provided with respect to the substantive carveout provided under Pillar 2 for tangible assets and payroll activities in relevant jurisdictions.

Additionally, the separate treaty-based subject to tax rule rate (STTR) was set at 9%, allowing paying (source) jurisdictions to impose limited top-up taxation on certain undertaxed related party payments. It remains unclear if these payments will include payments for services and capital gains. Remaining open under both Pillar 1 and Pillar 2 are many important technical questions necessary to implement the Framework, such as with respect to determining tax base.

Broadly unaddressed by the Framework are concerns raised regarding the participation and benefit of the process afforded to developing nations. In September, the G-24, voiced their extreme frustration with the process and July framework, demanding among other items: a higher allocable amount of profits to market jurisdictions under Pillar 1; a higher global minimum corporate tax rate than 15% under Pillar 2; clearer and broader source-taxing rights under the Pillar 2 STTR, which remain largely unaddressed by the Framework (and which would otherwise primarily benefit MNE headquarter countries, including G-7 members such as the United States); and flexibility in immediately abandoning local digital service taxes that the OECD is seeking to bar as part of the Framework. A lack of transparency around the process has also been raised as a concern for the many nations impacted by the agreement that are not necessarily afforded the same level of participation as G-7 and G-20 nations. Key G-24 members Nigeria and Kenya have not yet joined the Framework.

Concerned civil society organizations have encouraged developing nations to consider abandoning the deal and the process, or at minimum, to seek greater electability into or out of the Framework and assurances that efforts to improve transparency around the process and its overall revenue benefits will continue.

“We are grateful for President Biden’s and Treasury Secretary Yellen’s leadership in advancing these negotiations but support the equity and sustainability concerns raised by the G-24,” said Gary. “Given the collective challenges driving this international agreement, it is essential that the Framework be equitable and politically viable over the long-term.” The OECD has previously indicated that it is targeting the end of October 2021 to formally finalize this Framework. To achieve this ambitious goal, G20 Finance Ministers are scheduled to meet October 12 and 13 to continue to advance the Framework in anticipation of the meeting of G20 heads of state scheduled for October 30-31 in Venice, Italy. Then, governments will go about with the potentially politically challenging (and varied) acts necessary to implement any final Framework by 2023, other than with respect to the UTPR under Pillar 2, which would generally be implemented in 2024.


The Financial Accountability and Corporate Transparency (FACT) Coalition is a non-partisan alliance of more than 100 state, national, and international organizations working toward a fair tax system that addresses the challenges of a global economy and promoting policies to combat the harmful impacts of corrupt financial practices.

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