OECD/G20 digital tax reform is highly unlikely

Significance

The new tax framework's first pillar would establish a formula to divide tax rights between digital firms' host countries and user markets; and the second would fix a global minimum tax on corporate profits. Agreement on the latter seems within reach; but the first pillar is the subject of fierce disagreement between developed economies.

Impacts

• Digital tax disputes will add tension to relations between EU members and the United States.
• Corporate and digital tax questions will rise in prominence in bilateral and regional trade negotiations.
• If the global negotiations fail, this is likely to speed up a more substantial reform of business taxation in the EU.