The G20 Finance Ministers and Central Bank Governors issued a Communiqué yesterday which among other things, and not surprisingly, heralds "a historic agreement on a more stable and fairer international tax architecture" and "endorse[s] the key components of the two pillars on the reallocation of profits of multinational enterprises and an effective global minimum tax" according to the announcement by the OECD on July 1, and that of the G7 Finance Ministers and Central Bank Governors at the beginning of June.
This is the entirety of the Communiqué's embrace of the Pillars initiatives:
"After many years of discussions and building on the progress made last year, we have achieved a historic agreement on a more stable and fairer international tax architecture. We endorse the key components of the two pillars on the reallocation of profits of multinational enterprises and an effective global minimum tax as set out in the “Statement on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy” released by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on July 1. We call on the OECD/G20 Inclusive Framework on BEPS to swiftly address the remaining issues and finalise the design elements within the agreed framework together with a detailed plan for the implementation of the two pillars by our next meeting in October. We invite all members of the OECD/G20 Inclusive Framework on BEPS that have not yet joined the international agreement to do so. We welcome the consultation process with developing countries on assessing progress made through their participation at the OECD/G20 Inclusive Framework on BEPS and look forward to the Organisation for Economic Co-operation and Development (OECD) report in October."
For reasons alluded to in my immediately prior post about the OECD's July 1 announcement, this much briefer statement masks many difficult domestic tax and general legal issues that countries will have to resolve in order to superimpose coherently both Pillars on their existing tax regimes, in ways that are largely universal, harmonious if not virtually homogeneous, internally as well as internationally consistent, and legally effective, enforceable, and durable. There are many questions to ask and details to devise, about the most common features of tax systems and how unilaterally, or by way of a treaty-framed agreement, they interact with each other. This plan introduces the further substantial qualification that as they are envisaged to apply, the Pillars changes will effectively create a bespoke "sub tax regime" for large multinational corporations that are "in scope" for any tax year, presenting among many others questions about what is to happen if year-over-year they go in and out of scope. More generally, how the Pillars - based "sub tax regime" will mesh in all the ordinary ways it must, in all the ways income tax regimes are typically constructed, consistently no less among countries, and how this all become enforceable by each country as law, remain to be seen. The Canadian Income Tax Act for example has many evolved provisions dealing with policing access to taxpayers' tax account as their circumstances change. The Pillars anticipate this possibility and its offshoots in detailed Blueprints, but like architectural blueprints the engineering and construction of a building is somethings else again.
Adopting the real estate metaphor used in the preceding post about the July 1 announcement, even those most enthusiastic about the prospects of the OECD's and the G20's initiative would have to concede that much is indeed best described as "coming soon". Additionally, despite the aspirations for more firm guidance in October (all to be effective by 2023), even the most enthusiastic must be also realistic, to recognize that "soon" is certainly relative.
- Professor Scott Wilkie (Distinguished Professor of Practice, Osgoode Hall Law School)