The Pillar 1 proposal is designed to re-allocate some taxing rights to market jurisdictions (the so-called Amount A), regardless of physical presence. The Pillar 2 proposal is designed to achieve that multinational enterprises (MNE’s) pay a minimum level of tax. The OECD presentation (Presentation) including the preliminary results on the revenue and investment effects of the proposals can be found here.

The analysis covers data from more than 200 jurisdictions, including all 137 members of the Inclusive Framework (IF) and a large number of developing countries, and more than 27,000 MNE groups. The preliminary analysis has drawn on macro-level and micro-level combined data sources. The results are high-level (e.g. categorised in low-, middle- and high-income economies) and no country specific results have been published. Assumptions in the preliminary analysis are illustrative, and do not pre-judge decisions to be taken by the IF. The results will depend on the Pillar 1 and Pillar 2 designs, which is still to be decided by the IF.

Continued work will be carried out by the OECD during 2020, to ensure that the IF can be kept fully informed of the impact of key technical decisions relating to the design of the proposals. When new decisions are taken by the IF on the design and parameters of Pillars 1 and 2 further revisions to the economic analysis and impact assessment will be made.


The Policy Note, that was approved by the members of the IF on 23 January 2019, addresses the wish of the IF members to perform an in-depth analysis of the proposals under the two Pillars with a particular focus on the importance of assessing the revenue, economic and behavioural implications before actual decisions can be taken. In the Program of Work, which was released on 31 May 2019, it was highlighted that an economic analysis and impact assessment of the possible designs of a solution would be carried out in the following months.

The preliminary analysis of 13 February 2020 was released just a few weeks after the IF reaffirmed its commitment during its 29-30 January 2020 meeting to reach a consensus-based long-term solution by the end of 2020 to the tax challenges arising from the digitalisation of the economy and beyond.

Preliminary findings

Overall impact

The Presentation forwards that the combined effect of Pillar 1 (Amount A only) and Pillar 2 would lead to a significant increase in global tax revenues. Although the underlying data have limitations (e.g. it involves simplifying assumptions and is mainly based on 2016 data) and taking into account that the exact reform design is still to be decided, the Pillars could lead up to an increase of 4% of global corporate income tax revenues or USD 100 billion annually. The revenue gains are broadly similar across high, middle and low-income economies.

Revenue effects Pillar 1

The Presentation forwards that most jurisdictions would gain small tax revenues under Pillar 1 – as some taxing rights shift from low-tax jurisdictions to higher-tax jurisdictions. Low- and middle income economies (with GDP per capita below USD 12,000) are expected to gain relatively more than high income economies (with GDP per capita above USD 12,000). It is expected that investment hubs (with inward foreign direct investment exceeding 150% of GDP) would experience loss in tax revenues. Further, it is expected that more than half of the profit re-allocated under Amount A would come from 100 large MNE groups.

Revenue effects Pillar 2

The analysis shows that the ‘top-up’ tax – assuming jurisdictional blending and a 12.5% minimum tax rate – would raise a significant amount of additional tax revenues. The Presentation forwards that tax rate differentials between jurisdictions will be reduced, leading to a reduction in profit shifting by MNEs. This will be important for developing economies as such economies tend to be more adversely affected by profit shifting than high-income economies.

Our observations

The analysis shows that the impact, both for countries and companies, may be substantial. As the analysis is based on a lot of assumptions and very high-level aggregated data (mostly relating to the year 2016), the actual impact for individual countries and companies is likely to diverge. It is therefore recommendable to closely monitor the developments and assess the potential impact on an individual basis.

What´s next

The ongoing work will be presented in a new OECD Secretary-General Tax Report during the next meeting of G20 finance ministers and central bank governors in Riyadh, Saudi Arabia, on 22-23 February 2020. A new public consultation on the design of Pillar 2 is expected by April 2020. During the next IF members’ meeting on 1-2 July 2020 it is intended to reach agreement on the key policy features of a consensus-based solution to the Pillar 1 issues. Further, it is still planned to produce a final report setting out the technical details of a consensus-based solution to the Pillar 1 and Pillar 2 issues by the end of 2020. As it is yet uncertain whether a consensus-based solution between the IF members will ultimately be reached (and in what kind of form), we will closely monitor the developments and provide regular updates.