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January 24, 2024

OECD releases updated estimates of the economic impact of Pillar Two

  • On 9 January 2024, the Organization for Economic Co-operation and Development released a working paper "The Global Minimum and the taxation on MNE profit," with updated estimates of the economic impact of the Pillar Two global minimum tax.
  • Findings presented in the paper indicate that the global minimum tax would reduce incentives to shift profits, resulting in a substantial reduction in low-taxed profits worldwide.
  • The paper also estimates that the global minimum tax would increase global corporate income tax revenues by US$155b-192b per year.

Executive summary

On 9 January 2024, the Organisation for Economic Co-operation and Development (OECD) released a working paper titled "The Global Minimum Tax and the taxation of MNE profit" (the January 2024 working paper), which members of the OECD Secretariat discussed during a webinar held the same day. The working paper estimates the economic impact of the global minimum tax using new data on worldwide activity of multinational enterprises (MNEs) and building on new OECD estimates of global low-taxed profit.

The working paper has four main findings. First, the global minimum tax is estimated to reduce tax-rate differentials across jurisdictions. Second, profit shifting is estimated to be reduced by about half as a result of the global minimum tax. Third, the global minimum tax is estimated to reduce the global amount of MNE profit taxed below the 15% minimum effective tax rate by about 80%. Fourth, the global minimum tax is estimated to increase corporate income tax (CIT) revenues by US$155b-192b on average per year, which represents between 6.5%-8.1% of current global CIT revenues.

The working paper does not represent the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the authors.

Detailed discussion


The OECD released an initial impact assessment report on the Pillar One and Pillar Two proposals 12 October 2020, when initial blueprints of these proposals were released, estimating that the two pillars could increase global CIT revenues by about US$50b-80b per year.1 More recently, on 18 January 2023, the OECD released an updated economic impact assessment of the two pillars, reflecting higher estimates than had been anticipated. According to that report, Pillar One was estimated to bring an annual increase in global CIT revenue ranging from US$13b to US$36b based on data from 2021 and Pillar Two was estimated to increase global CIT revenue by around US$220b.2

On 11 October 2023, the OECD released a further update to the economic impact assessment of Pillar One.3 On 21 November 2023, the OECD released a working paper titled "Effective tax rates of MNEs: New evidence on global low-taxed profit" (the November working paper), providing estimates of the distribution of effective tax rates (ETRs) of large MNEs across and within jurisdictions. In particular, the November working paper indicates that more than half of global profits taxed at a rate below 15% are in high-tax jurisdictions.4

The Global Minimum Tax and the taxation of MNE profit

On 9 January 2024, the OECD hosted a webinar where members of the Secretariat discussed their latest estimates of the economic impact of the global minimum tax, as reflected in the working paper released the same day. The global minimum tax, set forth in the Model Global Anti-Base Erosion (GloBE) Rules, is a core element of Pillar Two. The January 2024 working paper uses data from 2017–2020, in contrast to previous estimates that were based on 2016 data. It also incorporates the agreed design as reflected in the GloBE Rules, with updated modeling of the substance-based income exclusion (SBIE), the allocation key under the under-taxed profits rules (UTPR) and the interaction with the US global intangible low-taxed income (GILTI) rules.

The analysis in the January 2024 working paper approximates the calculations involved in determining GloBE Income and ETR as prescribed by the GloBE Rules, including adjusting for certain temporary differences between book and tax records. The analysis builds on the November 2023 working paper's estimates of the global distribution of low-taxed profit. The modeling is based on alternative profit-shifting scenarios regarding the elasticity of the tax base relative to tax-rate differential. Four different implementation scenarios were modelled, reflecting a range of assumptions regarding implementation of the elements of the GloBE Rules by Inclusive Framework jurisdictions and other jurisdictions.

Importantly, the January 2024 working paper acknowledges the limitations in the data used, noting that the analysis is based on assumptions in areas where features are yet to be agreed upon or impacts that depend specifically on the extent to which countries throughout the world implement the new rules.

The findings in the January 2024 working paper cover four key areas:

Effects on tax-rate differentials

The January 2024 working paper estimates that the global minimum tax will increase ETRs in many low-tax jurisdictions, reducing the ETR differentials between investment hub jurisdictions and other jurisdictions by approximately 50 percentage points, from 14 percentage points to 7 percentage points on average.

Effects on profit shifting

The January 2024 working paper further estimates that total shifted profit will decline by approximately half. The estimates reflect increases in profits in high-, middle- and low-income jurisdictions and substantial reductions in profits in investment hub jurisdictions. However, the paper notes that some of these effects may materialize only over time.

Effects on low-taxed profits

According to the January 2024 working paper estimates, the global minimum tax will result in a reduction in global low-taxed profits, with the SBIE and other exclusions allowing a small amount of low-taxed profit to remain. The estimated reduction in the share of low-taxed MNE profit after the SBIE transition period is approximately 80%, from 36% to 7% of global profits. The paper describes this as being attributable to both the reduction in profit shifting and the application of top-up taxes under the GloBE rules. It further suggests that the global minimum tax will diminish the recent trend of declining CIT rates.

Effects on CIT revenues

The January 2024 working paper estimates that global CIT revenues will increase by between US$155b and US$192b each year based on 2017–2020 data, representing between 6.5% and 8.1% of global CIT revenues). Approximately two-thirds of this increase represents revenues from top-up taxes, with the remainder being indirect gains through reduced profit shifting. The paper also estimates that all jurisdiction groups will see revenue gains, with higher gains for high- and low-income jurisdictions relative to middle-income jurisdictions and more uncertainty with respect to the magnitude of the gains for investment hub jurisdictions. In this regard, the paper notes that the distribution of revenue gains across jurisdictions is highly sensitive to the assumptions around implementation of the GloBE Rules.

Ongoing work

The impact assessment work of the Secretariat will continue as needed. The Secretariat is providing jurisdiction-specific estimates confidentially to each Inclusive Framework jurisdiction and also has been providing bilateral assistance to jurisdictions in carrying out their own analyses.


Numerous countries now have implemented elements of the GloBE Rules, and implementation is in process or underway in many other countries. As work continues on technical and administrative matters related to the GloBE Rules in both the Inclusive Framework and individual countries, it will be important to monitor developments in the ongoing analysis of the economic impact of the global minimum tax. Companies should consider engaging with policymakers in relevant countries on how the GloBE Rules affect businesses and the broader fiscal implications for such countries.

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1 See EY Global Tax Alert, OECD releases economic impact analysis of BEPS 2.0 project proposals , dated 2 November 2020.

2 See EY Global Tax Alert, The Latest on BEPS and Beyond - February 2023 edition, dated 21 February 2023.

3 See EY Global Tax Alert, The Latest on BEPS and Beyond - October 2023 edition, dated 18 October 2023.

4 See EY Global Tax Alert, OECD releases fifth edition of Corporate Tax Statistics publication, dated 28 December 2023.

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Ernst & Young Belastingadviseurs LLP

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Ernst & Young LLP (United States)

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

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