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14 June 2021

G7 leaders affirm commitment to global tax changes under BEPS 2.0

Executive summary

On 11-13 June, the leaders of the G7 countries1 met in Cornwall under the United Kingdom (UK) Presidency of the G7. The communiqué issued at the conclusion of the summit includes an endorsement of the strong support expressed earlier by the G7 Finance Ministers for the global tax changes being developed in the G20/OECD2 Inclusive Framework project on addressing the tax challenges of the digitalization of the economy (the BEPS3 2.0 project).  

With the encouragement of this G7 support, attention now turns to the upcoming July meeting of the G20 Finance Ministers4 and the ongoing effort to achieve agreement among the 139 jurisdictions of the Inclusive Framework in connection with that meeting.

Detailed discussion

The communiqué issued on 13 June 2021 at the close of the G7 Leaders Summit includes a statement on the global tax changes being developed under Pillar One (relating to new nexus and profit allocation rules) and Pillar Two (relating to new global minimum tax rules) of the BEPS 2.0 project:

We need a tax system that is fair across the world. We endorse the historic commitment made by the G7 on 5 June. We will now continue the discussion to reach consensus on a global agreement on an equitable solution on the allocation of taxing rights and an ambitious global minimum tax of at least 15 per cent on a country-by-country basis, through the G20/OECD inclusive framework and look forward to reaching an agreement at the July meeting of G20 Finance Ministers and Central Bank Governors. With this, we have taken a significant step towards creating a fairer tax system fit for the 21st century, and reversing a 40-year race to the bottom. Our collaboration will create a stronger level playing field, and it will help raise more tax revenue to support investment and it will crack down on tax avoidance.

This statement follows a more detailed statement of support included in the communiqué issued on 5 June 2021 at the conclusion of the G7 Finance Ministers and Central Bank Governors meeting.5 This endorsement by the G7 leaders provides further encouragement for advancing to agreement in the broader Inclusive Framework. Efforts are focused now on trying to achieve a conceptual agreement in connection with the 9-10 July G20 Finance Ministers and Central Bank Governors meeting, with a view to finalizing that agreement in connection with October 2021 G20 meetings.

Implications

The proposals being developed in the BEPS 2.0 project contemplate significant changes in the overall international tax architecture under which multinational businesses operate. It is important for companies to follow these developments closely as they unfold in the coming weeks and beyond and to evaluate the potential impact of the proposals to their businesses. Affected companies should also follow related developments with respect to activity on Digital Services Taxes around the world.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Rotterdam

Ernst & Young Belastingadviseurs LLP, Amsterdam

Ernst & Young Solutions LLP, Singapore

Ernst & Young LLP (United Kingdom), London

Ernst & Young LLP (United States), Detroit

Ernst & Young LLP (United States), Global Tax Desk Network, New York

Ernst & Young LLP (United States), Washington, DC

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Endnotes

  1. The G7 countries are Canada, France, Germany, Italy, Japan, the United Kingdom (UK) and the United States (US). 
  2. Organisation for Economic Co-operation and Development.
  3. Base Erosion and Profit Shifting.
  4. The G20 includes the European Union and 19 individual countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the UK, and the US.
  5. See EY Global Tax Alert, G7 Finance Ministers express strong support for global tax changes under BEPS 2.0, dated 6 June 2021.

Document ID: 2021-5659

 
 

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