Man standing on rocks

Why BEPS 2.0 needs consistency, coordination and certainty

The G20 must lead – and consider input from businesses – to make global tax transformation workable for all.

In brief

  • The BEPS 2.0 project is making progress toward transformational international tax changes.
  • Unique technical and political challenges remain as individual countries consider legislation to adopt recommendations.
  • Now is the time for the G20 to lead in order to ensure the rules are consistent, coordinated and provide certainty to taxpayers. 

Progress on the Organisation for Economic Co-operation and Development (OCED)/G20 base erosion and profit shifting (BEPS) 2.0 project reached an inflection point in October 2021 when high-level political agreement on its key parameters was achieved. This reflected commitment from 137 of the 141 jurisdictions participating in the project on transformational changes to the international tax system. The G20 Finance Ministers endorsed the agreement and reiterated their pledge to advance the work under an ambitious timeline that envisioned new tax rules coming into effect in 2023.

One year later, a tremendous amount of work has been done on both components of the project. On Pillar One, new rules are being developed for dividing taxing rights over global business income with the objective of increasing the share of income allocated to market jurisdictions. On Pillar Two, details have been spelled out on global minimum tax rules aimed at ensuring that income is subject to tax of at least 15% regardless of where it is earned.  The current status and path forward for each pillar differ significantly, however, reflecting the unique technical and political challenges inherent in each effort.

On Pillar One, the OECD has issued a series of drafts laying out proposals for the key building blocks of the new approach for allocating global business income across jurisdictions. In July 2022, the OECD released a consolidated document providing a close to a comprehensive set of proposed rules. These documents do not reflect consensus agreement among the Inclusive Framework jurisdictions but were released to obtain feedback from stakeholders. The business community submitted extensive comments, garnering broad participation in the OECD-hosted consultation session in September 2022. The release of these proposals in draft form provided an invaluable opportunity for affected businesses to offer detailed input on the practical, commercial and competitive implications of the approaches being considered, including information about potential distortions that could result from the application of the complex formulas proposed to common business models.

The approach on Pillar Two over the past year has been quite different. The Inclusive Framework has released agreed Model Rules and explanatory Commentary laying out the details of the core components of the global minimum tax framework. These documents were released in final form, without prior stakeholder input, and are intended to be used by jurisdictions in making changes to their domestic tax laws to implement Pillar Two. The Inclusive Framework is now focused on a series of workstreams related to the operation of Pillar Two. That includes developing much-needed interpretive guidance on the complex concepts reflected in the Model Rules and fleshing out such administrative matters as the filing requirements for a global minimum tax return and safe harbors to ease compliance requirements. Also included is the establishment of a peer review process for evaluating the implementation of Pillar Two by jurisdictions. As this work began, the OECD hosted a preliminary consultation in April 2022 that allowed affected businesses to provide input into the range of matters that will need to be addressed.

Looking ahead, there appears to be considerable technical and political work to be done on the substantive design of the Pillar One rules and on achieving agreement of the Inclusive Framework jurisdictions. Moreover, implementation of Pillar One is dependent on adoption by a critical mass of jurisdictions. Against this backdrop, the Inclusive Framework agreed in July 2022 to an extended timeline that envisions Pillar One rules being effective in 2024 – a timeline that is still ambitious given the challenging work that remains.

On Pillar Two, even as essential design work continues in the Inclusive Framework, significant activity is already underway around the world with respect to jurisdictions’ implementation of the global minimum tax rules. That includes the negotiation of an EU directive that would mandate adoption of Pillar Two rules by all EU Member States. It also includes the release of Pillar Two draft legislation and ongoing public consultations in several jurisdictions and government announcements on Pillar Two plans in many other jurisdictions. While there has been no formal change in the Pillar Two timeline agreed to in October 2021, most jurisdictions now aim to have their rules in place to take effect beginning in 2024.

Focus on three elements

As this global tax transformation project continues to advance, the G20 leadership efforts should be focused on three essential elements – consistency, coordination and certainty.

  • Consistency across jurisdictions in the implementation of the new rules and in their interpretation and application on an ongoing basis is important. Clear communication reflecting consensus on the policy objectives of each pillar is needed to serve as a guidepost for addressing questions that likely will not be covered no matter how detailed the rules are.
  • Continuing coordination among jurisdictions will be necessary for dealing with the unintended consequences and unanticipated matters that will inevitably arise in a transformation of this magnitude. Close collaboration to refine the agreed upon rules and adapt to developments in the global economy will also be essential.
  • Certainty is highly valuable to taxpayers and tax administrations alike, as instability creates costs that are a drain on resources for both. Managing disputes regarding the application of the new rules to the greatest extent possible – and expeditiously resolving the disputes that nevertheless arise – will require a multilateral commitment to building on existing processes with creative new approaches to problem-solving.

It is clear that G20 leadership will continue to be vital long after new Pillar One and Pillar Two rules begin to take effect in jurisdictions around the world. It is equally clear that input from affected businesses will be essential to helping to ensure that the new rules are workable and can achieve the intended objective of stability in the global tax system. With active support from the G20, the Inclusive Framework and business must work together, proceeding deliberately and taking the time needed to get the fundamentals and the details right. The stakes for the global community are too high to do anything less.

(This article was originally published by the Global Governance Project in conjunction with the 2022 G20 Summit in Bali, Indonesia.) 


Pillar One and Pillar Two of the OECD/G20 BEPS 2.0 project have made important progress. The G20’s leadership efforts should be focused on consistency, coordination and certainty to successfully advance the project.

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