Summary

This research examines the compliance prices of OECD Pillar Two, i.e., the “World Minimal TaxA tax is a compulsory cost or cost collected by native, state, and nationwide governments from people or companies to cowl the prices of common authorities companies, items, and actions.,” for multinational enterprises headquartered within the European Union. Accumulating knowledge from chief monetary officers and heads of finance or tax departments, we estimate compliance price determinants and subsequently predict the general compliance burden. Outcomes point out complete one-off prices of about EUR 1.2 billion (as much as EUR 2.0 billion) and complete recurring prices of EUR 517 million EUR p.a. (as much as EUR 865 million EUR p.a.). Our findings inform the general public discourse by mitigating data asymmetries between policymakers and firms. Furthermore, we contribute by establishing a value benchmark to facilitate a scientific cost-benefit analysis of this coverage.

Introduction 

For the higher a part of the final decade, the worldwide minimal tax, or Pillar Two, has dominated worldwide tax coverage discussions. Growing out of the Base Erosion and Revenue ShiftingRevenue shifting is when multinational corporations cut back their tax burden by shifting the situation of their earnings from high-tax nations to low-tax jurisdictions and tax havens. (BEPS) Undertaking on the Organisation for Financial Co-operation and Growth (OECD), Pillar Two’s primary goal is to make sure that multinational enterprises (MNEs) with a consolidated group income of over EUR 750 million pay an efficient tax fee of no less than 15 % in every jurisdiction the place they earn revenue. The World Anti-Base Erosion Guidelines (GloBE) mannequin of Pillar Two guidelines (OECD, 2021) goals to attain this purpose by insurance policies comparable to a Certified Home Minimal Prime-Up Tax (QDMTT), an Revenue Inclusion Rule (IIR), and an Undertaxed Earnings Rule (UTPR). The principles are interlocking and are utilized by totally different jurisdictions. A QDMTT is utilized by a rustic on low-tax exercise inside its borders. An IIR is utilized by a rustic on the international earnings of corporations which can be headquartered in its jurisdiction. The UTPR is utilized to the low-tax earnings of an organization that has some presence in a jurisdiction, however the set off for taxation is the existence of low-tax earnings elsewhere on the planet. Some portion of this algorithm has been adopted by a number of dozen nations world wide, however the United States has not adopted the OECD guidelines.

International locations are actively exploring modifications to those guidelines. The potential modifications embrace addressing considerations about differential therapy of tax credit and payable (refundable) credit, and protected harbors that would restrict compliance prices with the UTPR. There are additionally ongoing discussions about the way to accommodate variations with the US strategy. Throughout the first six months of President Trump’s second time period, the US took a stick and carrot strategy by threatening tariffs (Trump, 2025a) and retaliatory tax measures (Gravelle, 2025) towards nations that enforced the Pillar Two guidelines (Trump, 2025b) towards US corporations whereas Congress moved to reform its minimal tax regime to web CFC-tested earnings, or NCTI (previously GILTI), within the One Huge Lovely Invoice Act (OBBBA) nearer in keeping with Pillar Two outcomes (Cole and Dunn, 2025). After the elimination of the Part 899 retaliatory tax proposal from the ultimate OBBBA textual content, the US and different G7 nations signed a political settlement on a side-by-side answer (U.S. Division of the Treasury, 2025) that might exclude US-parented teams from the IIR and UTPR. Moreover, the shortage of implementation by massive opponents like China and India leaves open the likelihood that the EU would be the largest financial system implementing the foundations. European policymakers should determine the way to stability the perceived advantages of the EU Directive relative to its real-world prices, figuring out that the latter may influence the competitiveness of European MNEs.

The best way through which the prices and advantages of adopting the GloBE guidelines have been analyzed in educational and coverage communities–evaluating the dimensions of elevated international income to the dimensions of compliance prices–is incomplete. It’s true that if each jurisdiction had been to indefinitely uphold a 15 % efficient company tax fee by a QDMTT, then total company tax revenues would improve. Nevertheless, if the distribution of earnings stays in place, further tax revenues would predominantly accrue to previously low-tax jurisdictions, with high-tax jurisdictions receiving little to no improve. On the identical time, it’s seemingly that MNEs expense compliance prices within the jurisdictions the place they’re headquartered, usually high-tax jurisdictions. There would then be a geographical discrepancy between the income gainers and the situation of the Pillar Two compliance prices.

Moreover, even when the purpose of limiting a race to the underside in tax charges is achieved by way of OECD Pillar Two, this doesn’t essentially end in larger disposable tax revenues, as competitors for investments could also be deferred to different margins. For instance, if jurisdictions resort to competing for investments by way of lump-sum subsidies, the online income impact might even be destructive (Janeba and Schjelderup, 2023). As well as, aggressive disadvantages for EU-based MNEs come up since Pillar Two is relevant to their worldwide actions. MNEs headquartered outdoors the EU27 are, usually, solely affected by Pillar Two with regard to their within-EU publicity, provided that their jurisdictions of origin don’t implement comparable insurance policies.

Constructing on work accomplished by Spengel et al. (2023) on the Pillar Two compliance prices of German MNEs, on this paper, we broaden the scope to incorporate a pan-EU pattern of teams affected by the EU Directive on Pillar Two. In part 2, we define Pillar Two’s conceptual framework and up to date developments. Part 3 introduces our compliance price survey and particulars survey responses. In part 4, we estimate price determinants and predict total compliance prices for the EU27-based MNEs we determine as affected by the coverage. We conclude in part 5 by discussing how policymakers ought to use this knowledge to higher inform a cost-benefit evaluation of constant with the Directive. Whereas this work doesn’t totally full the image of compliance prices, further revenues, and the situation of every, it does present new proof on the dimensions and distribution of compliance prices for EU corporations.

References

Cole, A. and Dunn, P. (2025). The “Huge Lovely Invoice”: Worldwide Tax Modifications. Tax Basis – On-line: https://taxfoundation.org/weblog/big-beautiful-bill-international-tax-changes/. Accessed: 2025-09-19.

Gravelle, J. G. (2025). Enforcement of Cures Towards Unfair International Taxes. On-line: https://crsreports.congress.gov/product/pdf/IF/IF13023. CRS Report IF13023, Model 7. Up- dated July 9, 2025. Accessed: 2025-09-19.

Janeba, E. and Schjelderup, G. (2023). The World Minimal Tax Raises Extra Revenues Than You Suppose, or A lot Much less. SSRN Digital Journal.

OECD (2021). World Anti-Base Erosion (GloBE) Mannequin Guidelines (Pillar Two). OECD Publishing, Paris.

Spengel, C., Klein, D., Müller, J., Pfrang, A., Schulz, I., Winter, S., Gaul, J., Weck, S., and Wickel, S. (2023). Die globale Mindeststeuer – Kosten und Nutzen aus deutscher Sicht. Der Betrieb, 76:1–14.

Trump, D. J. (2025a). Memorandum on America First Commerce Coverage (DCPD-202500145). Workplace of the Federal Register, Nationwide Archives and Data Administration. January 30, 2025.

Trump, D. J. (2025b). The Group for Financial Co-operation and Growth (OECD) World Tax Deal (World Tax Deal). Memorandum for the Secretary of the Treasury, the US Commerce Consultant, and Everlasting Consultant to the OECD. January 20, 2025.

U.S. Division of the Treasury (2025). G7 Assertion on World Minimal Tax. U.S. Division of the Treasury – On-line: https://residence.treasury.gov/information/press-releases/sb0181.

Share this text

Twitter
LinkedIn
Fb
Electronic mail