Barbados joins agreement to address the tax challenges arising from the digitalisation of the economy
12/08/2021 – Barbados has joined the two-pillar plan to reform the international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate, bringing to 133 the total number of jurisdictions participating in the agreement.
The Statement, released on the 1st of July 2021 and agreed by Barbados today, establishes a new proposal for international tax reform based on a two-pillar package.
Pillar One aims to ensure a fairer distribution of profits and taxing rights among countries with respect to the largest Multinational Enterprises (MNEs), including digital companies. It would re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there.
Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases.
This two-pillar package is the outcome of negotiations co-ordinated by the OECD for much of the last decade and aims to ensure that large MNEs pay tax where they operate and earn profits, while adding much-needed certainty and stability to the international tax system.
The two-pillar solution contains a number of points on which members of the OECD/G20 Inclusive Framework on BEPS must still agree details. In addition, a small number of the Inclusive Framework’s 139 members have not signed on to these proposals. The deal will be finalised in October 2021, complete with an implementation plan to develop model legislation, guidance and a multilateral treaty in 2022, with implementation from 2023.
- Further information on the continuing international tax reform negotiations is also available at:https://oe.cd/bepsaction1