Executive Summary

On 23-24 October 2024, G20 Finance Ministers and Central Bank Governors met in Washington, DC. The meeting concluded with a communiqué that reaffirms the G20 Finance Ministers' commitment to the October 2021 statement of the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on the Base Erosion and Profit Shifting (BEPS) 2.0 project and to swift implementation by all interested jurisdictions.

The G20 Finance Ministers also emphasized their commitment to working toward a fairer, more inclusive, stable and efficient international tax system fit for the 21st century. The communiqué restates the commitment to tax transparency and fostering global dialogue on effective taxation, including the taxation of ultra-high-net-worth individuals and highlights the importance of progressive taxation in reducing domestic inequalities and achieving the Sustainable Development Goals (SDGs).

In advance of the meeting, the OECD released the OECD Secretary-General's Tax Report to the G20 Finance Ministers and Central Bank Governors. This report provides an update on activities with respect to the G20's international tax agenda, including ongoing work on the BEPS 2.0 project, tax transparency, and capacity-building efforts.

Detailed discussion

G20 communiqué

The fourth G20 Finance Ministers and Central Bank Governors Meeting of the Brazilian presidency took place in Washington, DC on 23-24 October 2024. At the conclusion of the meeting, a communiqué was released highlighting the G20's ongoing commitment to international tax cooperation and progressive taxation.

The communiqué reaffirms the G20's commitment to the OECD/G20 Inclusive Framework on BEPS and Pillars One and Two:

32. The OECD/G20 Inclusive Framework (IF) on BEPS has demonstrated the potential of international tax cooperation over the past decade. We welcome the progress made on the Two-Pillar Solution under the IF on BEPS and reiterate our commitment to the October 2021 Statement of the IF and to the swift implementation of the Two-Pillar Solution by all interested jurisdictions. We encourage IF members to expeditiously complete the negotiations on a final package on Pillar One by resolving the remaining issues on a framework for Amount B and allowing the Multilateral Convention (MLC) to be finalized and opened for signing as soon as possible. We call on the IF to accelerate the technical work to facilitate implementation and administration of the MLC. With respect to Pillar Two, we welcome the first signing ceremony of the subject-to-tax rule (STTR) on 19 September as a significant milestone. We also welcome progress made on the GloBE Rules as a common approach and will continue to support ongoing work to ensure coordination among countries implementing these rules.

The communiqué also emphasizes the G20's interest in progressive taxation:

30. Progressive taxation is one of the key tools to reduce domestic inequalities, strengthen fiscal sustainability, facilitate budget consolidation, promote SSBIG [strong, sustainable, balanced and inclusive growth], and facilitate the achievement of the SDGs. International tax cooperation is fundamental to encourage best practices, improve domestic tax administration capabilities, support national tax reforms, strengthen tax transparency, and strengthen national endeavors to effectively implement progressive taxation, including domestic income and wealth distribution, while considering domestic circumstances, needs, and priorities and respecting the sovereign right of countries to adopt and implement measures that they consider feasible. Broad tax bases and effective enforcement are the foundations of progressive tax systems. In line with our landmark Rio de Janeiro Declaration on International Tax Cooperation endorsed on 25 July 2024, we will continue to work together towards a fairer, more inclusive, stable, and efficient international tax system fit for the 21st century, restating our commitment to tax transparency and fostering global dialogue on effective taxation, including of ultra-high-net-worth individuals, among other issues.

In addition, the communiqué expresses support for ongoing tax discussions at the United Nations:

Our international tax cooperation should be inclusive and effective and aimed at reaching broad consensus, maximizing synergies among the existing international fora, while seeking to avoid unnecessary duplication of efforts. We continue to encourage constructive discussions at the United Nations on the development of a Framework Convention on International Taxation Cooperation and its protocols.

October 2024 OECD Secretary-General Report

The Secretary-General's Report provides an update on the ongoing work on Pillars One and Two, indicating that 45 jurisdictions have already enacted or introduced legislation to implement the global minimum tax under the Global Anti-Base Erosion (GloBE) Rules, with an additional 16 jurisdictions taking concrete steps toward implementation. The report states that approximately 60% of large multinational enterprises (MNEs) are projected to fall within the scope of the global minimum tax by the end of 2024, with 90% in-scope by 2025.

Furthermore, the report highlights progress on the Subject-to-Tax Rule (STTR) component of Pillar Two, noting that a high-level signing ceremony for the MLC to implement the STTR took place on 19 September 2024 in Paris, with nine jurisdictions signing the STTR MLC during this ceremony and several more expressing the intention to do so. (See EY Global Tax Alert, OECD holds signing ceremony for the STTR MLI, dated 25 September 2024.) The STTR MLC will enable more than 70 developing country members of the Inclusive Framework to request the inclusion of the STTR in their treaties with member jurisdictions that have corporate income tax rates below 9% on covered payments.

The report indicates that members of the Inclusive Framework have secured near full consensus on the MLC to implement Amount A under Pillar One and are working to resolve remaining gaps on a framework for Amount B. The OECD plans to publish a list of countries applying Amount B on its website later this year.

The report provides a brief status update on the adoption of the minimum standards established by the BEPS project under Actions 5 (harmful tax practices), 6 (tax treaty abuse), 13 (country-by-country reporting), and 14 (mutual agreement procedure).

The report also highlights the progress in global tax transparency efforts by the Global Forum on Transparency and Exchange of Information for Tax Purposes, which has more than 170 members. According to the report, as of 2023, 126 jurisdictions have committed to the Automatic Exchange of Information standard, with almost 110 jurisdictions already exchanging information. This has led to the exchange of information on more than 130m financial accounts, representing nearly €12t in assets. The report states that developing countries have benefited from the exchange of information, collecting more than €45b in revenues generated through the exchange of information since 2009.

Finally, the report indicates that, as the 10-year anniversary of the launch of the BEPS 2015 Final Reports nears, the Inclusive Framework will take stock of the BEPS project and look at the future. At the next Plenary meeting of the Inclusive Framework, to take place early 2025, members will reflect on a future agenda and pick up on the important discussions undertaken throughout 2024 regarding ensuring inclusiveness and stakeholder participation at the Inclusive Framework.

Implications

The G20 communiqué reflects the continuing commitment to both pillars of the BEPS 2.0 project as well as the ongoing efforts to expand and broaden international tax cooperation, particularly in the areas of taxing ultra-high-net-worth individuals and implementing progressive taxation. The Secretary-General Report describes the progress that has been made on Pillars One and Two and work that is continuing on both Pillars. The Report also notes the work in other areas, including the ongoing focus on increasing transparency and the growing interest in tax as a tool to address inequality.

Businesses should continue to track legislative developments and proposals across relevant jurisdictions to be ready for tax changes. Looking ahead, it also will be important to monitor the emerging tax discussions involving new, or newly expanded, focus areas as well as those taking place in other global and regional forums.