OECD/G20 Inclusive Framework tax deal

OECD/G20 Inclusive Framework tax deal

Part of: Prelims and GS II – International Relations 

Context The two-pillar solution under the  OECD/G20 Inclusive framework will be delivered to the G20 Finance Ministers meeting in Washington DC on 13 October, then to the G20 Leaders Summit in Rome at the end of the month.

• Countries are aiming to sign a multilateral convention during 2022, with effective implementation in 2023.

• India has already joined the G20–OECD inclusive framework deal. 
• It seeks to reform international tax rules and ensure that multinational enterprises pay their fair share wherever they operate.
• 130 countries and jurisdictions, representing more than 90% of global GDP, have signed the deal.

Two pillars of framework

• Dealing with transnational and digital companies: It ensures that large multinational enterprises, including digital companies, pay tax where they operate and earn profits.
• Dealing with low-tax jurisdictions to address cross-border profit shifting and treaty shopping: It seeks to put a floor under competition among countries through a global minimum corporate tax rate, currently proposed at 15%.