Pillar two, on the other hand, is a global minimum tax regime, intended to lessen the incentive for MNEs to shift profits to low/no tax jurisdictions. The existing international tax rules, tax the profits of a foreign company, in a country other than the country of residence, only if the foreign company has a Permanent Establishment (PE) in another country. In fact, the tax deal may ensure tax certainty, end tariff wars between countries and make tax competition amongst nations unworkable by tapering down any such opportunities to bare minimum. The road aheadThe global tax agreement is the culmination of years of proposals and negotiations. The decision of the global pact is a breakthrough toward the global consensus necessary to modernise the international tax system.

Source: The Hindu October 31, 2021 21:18 UTC