UK-based companies will be subject to a new minimum tax rate to promote a fairer global distribution of profits and taxing rights from 31 December 2023, according to a letter published by Lucy Frazer MP, Financial Secretary to HM Treasury. The legislation will implement Pillar 2 of the Organisation for Economic Co-operation and Development’s global tax reform proposal, which was first presented in 2021. Pillar 2 proposes introducing a global minimum tax rate of 15% by 2023. Pillar 1 will ensure developing countries are paid the percentage of tax revenue globally that they are owed. Together, the two pillars will aim to reduce overly aggressive tax practices from multinational companies. The UK government’s consultation on Pillar 2 closed in April, and the government is now in the process of developing the draft legislation and engaging with international partners on the implementation framework. Giving businesses until the end of 2023 will “allow the policy to benefit from progress on the international process, while maintaining the UK as a leader in implementing these reforms”, Frazer wrote. Over 130 countries have also agreed to implement the two-pillar tax reform in their own jurisdictions. Frazer said: “The government continues to strongly support the efforts underway through the G20/OECD Inclusive Framework to address the tax challenges arising from globalisation and the digitalisation of the economy and to adopt a global minimum tax.”
