Today the OECD has announced more details on how its new international minimum tax system - known as Pillar Two - will work and apply to different businesses and countries.
Matt Ryan, head of international tax at PwC UK, comments:
“The new rules are expected to fundamentally shape the international corporate tax system of the future.
“A new global minimum effective tax rate will halt the ‘race to the bottom’ but it still allows governments some room to stimulate the economy using the tax system to support economic resilience and recovery. This could be through generous accelerated deductions for investment expenditure which do not reduce the Pillar Two effective tax rate, or by targeted reliefs which do reduce the effective tax rate while remaining subject to the agreed 15% floor.
“The main rules attaining to the new tax system are not compulsory but have been issued as a common approach, meaning, countries could in theory decide not to implement the new minimum tax system. However, the system is designed in such a way that a lower-tax jurisdiction may be better off in implementing the higher minimum tax rules so they don’t end up losing out on revenue opportunities.”
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