From deal to reality
G20 Summit

From deal to reality

An ambitious international corporate tax deal has been endorsed by 136 countries, but recent developments have cast doubt on its implementation – and G20 leaders should redouble their commitment to it

The G20 and the Organisation for Economic Co-operation and Development’s groundbreaking October 2021 international corporate tax deal, which 136 countries have endorsed, has made steady progress towards finalisation and implementation over the past year. However, the ambitious project has also encountered legislative roadblocks on both sides of the Atlantic that have upended the OECD’s initial two-year plan to get it fully done.

Leaders at their Bali Summit on 15–16 November 2022 should redouble their commitment to its historic Two-Pillar Solution, ensuring that there is enough political momentum at the leaders’ level to translate the lofty ambitions of the deal into a legal reality in international treaties and domestic tax law and regulation.

Progress so far

Countries have made the most progress on finalising Pillar Two of the tax deal, which envisages a global minimum effective corporate tax rate of 15% and other measures that facilitate the residual taxation by end-market jurisdictions. In addition, technical work on the model Global Anti-Base Erosion (GloBE) rules and commentary was finalised in March 2022. Furthermore, all G7 members, the European Union, and several G20 members and other tax jurisdictions in the Inclusive Framework are actively planning changes to their domestic legislation to implement the new rules. However, most countries do not plan on implementing these changes until 2024.

Furthermore, technical negotiations on Pillar One have been delayed and are still ongoing. In July 2022, OECD secretary-general Mathias Cormann said that the OECD would keep working as quickly as possible to finalise this work, but would take as much time as necessary to get the rules right. The OECD expects negotiations over Pillar One’s Amount A will be concluded in the first half of 2023, followed by the finalisation of the full text of a treaty by mid-2024.


The Two-Pillar Solution has been delayed due to domestic and supranational legislative politics in several jurisdictions. Originally the OECD planned to finalise the rules under both pillars in 2022; implementation in a multilateral convention and domestic legislation were slated for 2023, although now they are unlikely to come into force until at least 2024. The EU’s unanimity requirement and the complexities of American congressional politics are the main obstacles facing the implementation of the new international corporate taxation regime.

Embracing the OECD’s initial two-year timeline for implementation, the EU released a draft directive for the implementation of Pillar Two in December 2021. However, the directive has failed to get unanimous approval because of opposition from Poland and Hungary, which each hold a veto over decisions made by the bloc. Poland initially opposed the tax directive but reversed its position in June 2022. In response to Hungary’s enduring opposition to the minimum tax, France and Germany have committed to moving ahead with domestic rules to enforce the minimum tax and have applied diplomatic pressure on Budapest to change its position.

Although the Biden administration implemented elements of the global corporate tax deal in the Inflation Reduction Act signed into law in August 2022, this US legislation is missing vital elements of the global corporate tax deal. For example, the legislation sets a $1 billion pre-tax revenue threshold for application, whereas the G20-OECD blueprint called for a threshold of €750 million in revenue. Furthermore, the act applies the 15% minimum tax rate to a company’s adjusted book income, which is to be calculated on an aggregate basis, rather than the country-by-country basis agreed upon in the October 2021 deal.

The path ahead

Recent developments cast doubt on the comprehensive implementation of the Two-Pillar Solution according to the G20 and OECD’s revised timelines. The widespread implementation of vital elements of the agreement, such as the revenue threshold and accounting methods, is also at risk. World leaders gathered at Bali have a historic opportunity to reaffirm their commitment to the harmonised implementation of the Two-Pillar Solution by 2023, ensuring the project does not lose momentum and remains on track. Furthermore, the G20 should ensure the Inclusive Framework updates its transparency framework to foster tax compliance in the ever-growing crypto-currency markets, promote the inclusion of developing economies in the new framework, and account for the gendered implications of this tax policy reform.