The need to step up coordination in the field of international taxation has returned to the forefront in recent years as current international tax principles have failed to keep pace with increasingly globalised and digitalised business practices. Multinationals are becoming increasingly adept at using loopholes in the tax codes to lower their overall tax liability, resulting in a widespread perception that an in-depth reform of the system is needed.

International institutions play an important role in any overhaul of the global corporate tax framework. The OECD’s Inclusive Framework on BEPS and Statement on a Two Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy (8 October 2021) can be seen as important milestones in this regard. This article discusses the fundamentals of the OECD Inclusive Framework and two-pillar solution, the proposed implementation in the EU, the budgetary consequences and some general issues pertaining to the blueprint.

Overall, the article argues that the OECD two-pillar solution will effectively achieve what it was designed to do, namely it will contribute to a reduction of tax competition between countries, upgrade the link between the place where taxes are paid and the place where value is created and ensure that large multinationals pay their fair share of tax. The multilateral agreement could therefore significantly help in a more efficient sharing of the tax burden between different production factors. Policymakers should thus be stimulated to put the agreement into practice.