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The emerging shift in international tax policy

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Dr. Shafi Khan

FCC Lahore

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The 8th of October 2021 will perhaps be long remembered as a milestone in the history of international tax policy; the day when 136 nations reached a political agreement to adopt landmark new tax rules in the international tax arena. The agreement achieved under the umbrella of the Organization for Economic Development and Cooperation (OECD) has been the product of long-debated and often-stuck sessions at least since 2015.

The prospective shift in the international tax policy that draws on the so-called “two pillar approach” was approved by G-20 leaders in the Rome Declaration on 30 October2021. The global consensus on the new policy (now agreed by 137 out of 140 participating nations) foresees two landmark changes in the taxation of multinationals and will be enforced by years 2023-24. While the operational details and related rules are yet to be crafted, the new policy will bring a substantive shift in the existing hundred-year-old international tax structure. Under Pillar-1 of the agreement, the market jurisdictions will have taxing rights over the profits of certain digital multinational companies; likewise, the Pillar-2 proposes a global minimum corporate tax rate of 15%. This session will discuss the potential consequences of the proposed changes in the global tax policy in general and will also touch upon its implications for Pakistan.