Mathias Cormann says a global base tax rate of 15 per cent is on track to hit its 2024 deadline

Measures to stop large companies shopping for low tax jurisdictions, including a 15 per cent global base tax rate, are on track, OECD secretary-general Mathias Cormann says.

OECD secretary-general Mathias Cormann.

A global base rate of tax covering more than 90 per cent of the world’s economic output is on track to be in place by 2024, and will deliver an estimated $US150bn in new tax revenue to governments each year once implemented, OECD secretary-general Mathias Cormann says.

Speaking at the OECD Forum on Tax Administration which concluded in Sydney on Friday, the former Australian finance minister said countries such as Switzerland, Singapore and the UK were already well on the way to the implementation of the second pillar of the so-called “two-pillar solution’’.

The solution, devised by members of the OECD and G20, seeks to ensure that multinational enterprises (MNEs) are subject to a minimum tax rate of 15 per cent.

The framework is designed to hinder companies shopping around for low-tax jurisdictions and is also a response to the increasing digitalisation of finance.

“These changes have brought with them challenges to the rules for taxing international business income, which have prevailed for more than a hundred years and resulted in MNEs not paying their fair share of tax despite the huge profits many of these businesses have garnered as the world has become increasingly interconnected,’’ the OECD said, when releasing the agreed framework late last year.

Mr Cormann said on Friday that 137 countries and jurisdictions had signed up to the framework agreement.

“And of course while the agreement itself was significant, ultimately what matters is its timely and effective practical implementation in countries around the world,’’ he said.

“From the OECD’s perspective the technical work on the model rules of the Pillar Two global minimum tax is essentially complete.

“It is now up to individual countries and jurisdictions to pursue the domestic implementation in time for the 2024 deadline to come into effect.’’

Mr Cormann said there was momentum building on the implementation front.

“Switzerland, the United Kingdom, Indonesia, Canada, the United Arab Emirates, Singapore and others are well under way in progressing the implementation of Pillar Two,’’he said.

Five European Union nations including France and Spain had also pledged to implement the minimum tax regardless of whether an EU directive was agreed.

“Once there is a critical mass of countries who have legislated the global corporate minimum tax rate, it will very quickly become self-perpetuating as it will not be in any country’s interest to leave money on the table for other jurisdictions to collect at their expense,’’ Mr Cormann said.

“That is why we are quietly optimistic that the momentum is there to ensure that Pillar Two of this historic agreement will indeed be implemented in time for 2024.’’

Pillar One of the framework relates to ensuring that taxing rights over the profits of the world’s 100 largest and most profitable companies are reallocated to the jurisdictions where their customers are located, not offshored to tax havens or simply other countries.

That measure is expected to reallocate taxing rights over $US125bn in profits, and Mr Cormann said the intensive technical work to finalise the text of a multilateral convention on this was continuing.

Originally published as Mathias Cormann says a global base tax rate of 15 per cent is on track to hit its 2024 deadline