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A fragile agreement on global tax reform is near

Monday, May 24, 2021

Significance

Political pressure for tax reform has increased as many large tech firms, in particular, have made large profits during the pandemic, and many countries need to raise tax revenues to bolster their budgets.

Impacts

  • Once there is more certainty of the details, governments are likely to have very different views about the costs and benefits of the plan.
  • The US proposal to extend Pillar 1 marks the start of a shift in the global tax system from source taxation towards market country taxation.
  • Many small and developing nations will oppose the US plan to extend Pillar 2 to include limiting tax competition, as they benefit from this.

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