The OECD and G20 recently announced the release of a new Multilateral Convention (MLC) that will implement OECD Pillar One and address tax challenges created by globalization and digitalization. According to the release, the new convention “reallocate[es] taxing rights to market jurisdictions” for the share of profits made by large enterprises operating in their markets “regardless of physical presence,” it “repeals and prevents proliferation of digital service taxes…, secures measures to avoid double taxation, and enhances stability and certainty in the international tax system.” The MLC provides for a coordinated taxation system and contains provisions “designed to address the unique circumstances of developing Inclusive Framework members.” It is expected that reallocation of taxation rights under the MLC will generate between 17 – 32 billion USD in tax revenue, with most of that money going to “low and middle-income countries” instead of “investment hub” countries.

According to the OECD Secretary-General, the MLC allows countries to “swiftly move forward with the steps necessary to secure signature and ratification” and “represents significant progress towards opening the Convention for signature.” The announcement mentioned that progress on Pillar two of the Inclusive Framework has been good, with the second Pillar introducing “model rules for the global minimum tax rate of 15% on the profits of [large multinational entities] ….” Finally, the Convention will be given to G20 Finance Ministers and Central Bank Governors before their Morrocco meeting.