The shape and detail of the Pillar 1 and Pillar 2 proposals which form part of what some have described as the "biggest revolution in international tax for a hundred years" are becoming more clear as time passes. The fanfare from the media is almost deafening, and much of the nuance is being lost.

Yesterday the OECD announced that the members of their Global Forum had come to the conclusion that the proposals should be agreed and accepted. Of course, the fine details are yet to be agreed and we can only talk in general terms but there are actually some very interesting things being developed. The Irish were a particularly key member in that they embody the Onshore/Offshore concept of a mainstream economy with high levels of social standards coupled with low taxes for corporations and an emphasis on substance and an educated workforce. Until the 7th October they had held out against the agreement but after receiving reassurances they signed up and the last of the western economies was on board.

So, what were the reassurances they sought that were such a roadblock? They were essentially simple:

i) confirmation of what many of the commentators already knew. The "Global Minimum Tax Rate" rules which mandate a rate of 15% will apply only to overseas subsidiaries of resident entities with a turnover of over $750m (amongst other criteria). In other words...the Irish basic corporation tax rate of 12.5% and all other tax rates around the world below 15% are not obliged to rise  for ordinary businesses. This is not an Irish carve out. This is a clarification of the proposal.

ii) that the language of the G7 that the minimum rate should be "at least 15%" be amended to read "15%", so added clarity there.

This is a major step forward in our understanding. It cuts through the smoke and mirrors of the media trumpeting that the world will soon have a unified 15% corporation tax rate. 

It is the case that tax rates will probably rise around the globe. That is the result of the pandemic and huge public borrowing, but this clarification has ensured that the sovereign right to tax in accordance with the needs of the territory or nation in question and not in accordance with an arbitrary politically palatable figure set by the 7 richest countries in the world remain, at least in part.

We are yet to see any detailed proposals and it is not even clear that domestic tax rates will be required to rise (though a penalty rate of 15% is certainly an obligation in some circumstances) but this much is clear; no universally applicable minimum corporation tax rate is required by the OECD "Global Minimum Tax Rate". The media would do well to make that clear, because they either misunderstand or are wilfully refusing to see it.