On Wednesday 15 February, experts from the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) presented their new estimates of the impact on revenue of the implementation of the two-pillar tax reform. Their results were even more encouraging than they had been previously.
Pillar I consists of a tax on the digital sector, while Pillar II provides for a minimum 15% tax on multinationals.
For Pierce O'Reilly, head of the OECD’s Business and International Taxes Unit, “benefits of Pillar one and Pillar two as well extend well beyond revenue” and include “tax certainty, tech stability, avoiding more chaotic international tax system characterised by unilateral measures”.
The reform would also, he said, avoid more tax disputes and even potential trade disputes that would all be burdensome on growth and investment. “We believe these two pillars will deliver revenue, but more broadly than that, we also believe that they will deliver a tax environment that is more conducive to investment and growth”, he said.
On the other hand, the revenue estimates are very positive. According to O'Reilly, Pillar I would raise about $200 billion in tax revenue, according to the latest available data, which is double the amount estimated over the past 5 years.
Moreover, he demonstrated that this reform would also benefit low-GDP countries, since they would make proportionately more profit from the amount of corporate tax.
Regarding developing countries, he cited a study which showed that the implementation of Pillar I would double the income of those countries studied.
Alexander Klemm, an IMF staff member, focused on developing countries. They will lose some revenue because of the digital services tax, but it generates extremely little revenue, so the impact on revenue would be very small. On the other hand, all countries are expected to gain revenue from reduced profit shifting, with the exception of some low-tax jurisdictions.
According to O'Reilly, “a key goal of that work is to try to level the playing field across all member jurisdictions so that all member jurisdictions have access to the same information and can really make informed choices”. This is why the OECD organises lots of technical sessions to help countries implement international tax reform.
For its part, the EU Council validated the directive implementing Pillar II in December 2022 (see EUROPE 13085/8). Pillar I is still under discussion at international level. (Original version in French by Anne Damiani)