Organization for Economic Cooperation and Development OECD

The Organization for Economic Cooperation and Development (OECD) has long championed a two-pillar approach to address the tax implications of digitalization and globalization. In 2025, this initiative remains at the forefront of international tax reform.

While Pillar Two—introducing a 15 percent global minimum corporate tax rate—has gained traction with more than 40 countries enacting legislation, Pillar One—focused on reallocating taxing rights to market jurisdictions—faces mounting implementation challenges. The recent withdrawal of the United States from the agreement further complicates prospects for global consensus.

In this blog post we outline the status of both pillars, examine the obstacles ahead, and offers guidance for multinational enterprises (MNEs) navigating this evolving framework.

Background | OECD

The OECD’s two-pillar solution emerged from the Base Erosion and Profit Shifting (BEPS) 2.0 project, designed to modernize international tax rules for a digital and globalized economy.

• Pillar One reallocates taxing rights to market jurisdictions, targeting large and highly digitalized companies. It aims to ensure that profits are taxed where economic activity occurs, even without physical presence.
• Pillar Two establishes a global minimum corporate tax of 15 percent to prevent tax base erosion by setting a floor on corporate tax competition.

As of early 2025, more than 40 jurisdictions have enacted legislation or are in the process of implementing Pillar Two rules. However, Pillar One’s legal and political complexity, coupled with the United States’ formal withdrawal from the agreement, threatens the viability of a unified approach.

Recent Changes

Recent developments affecting the OECD two-pillar framework include:

Global Adoption of Pillar Two: Countries in the EU, Asia, and Latin America have implemented or committed to enforcing the 15 percent minimum tax under the Global Anti-Base Erosion (GloBE) rules.
Stalemate on Pillar One Implementation: Legal uncertainties, political reluctance, and administrative complexity have delayed final agreement on taxing rights reallocation.
 U.S. Withdrawal: In January 2025, the U.S. announced its exit from the OECD agreement via executive order. This move undermines efforts to achieve multilateral consensus, particularly for Pillar One, which requires broad participation for effective enforcement.
 Fragmentation Risk: Without U.S. involvement, some jurisdictions may revert to or expand unilateral measures such as digital services taxes (DSTs), potentially triggering trade disputes.

Impact on Global Companies

For multinational enterprises, the mixed progress of the two-pillar solution creates operational and strategic uncertainty:

• Increased Compliance Burdens: Pillar Two’s implementation across jurisdictions requires detailed jurisdiction-by-jurisdiction effective tax rate calculations, reporting, and documentation.
• Exposure to Top-Up Taxes: U.S.-headquartered MNEs may become subject to top-up taxes in countries enforcing GloBE rules, even though the U.S. has opted out.
• Potential for Digital Service Tax Resurgence: The stalled Pillar One agreement could prompt countries to reintroduce DSTs, targeting digital revenues in ways that disproportionately affect U.S.-based firms.
• Strategic Tax Planning Challenges: MNEs must now evaluate their global structures considering inconsistent international frameworks, dual reporting requirements, and reputational risks.

Compliance and Reporting

Businesses impacted by Pillar Two should prioritize the following:

– GloBE Information Returns: Jurisdictions that have implemented Pillar Two will require detailed disclosures on effective tax rates, covered taxes, and eligible substance-based exclusions.
– Transfer Pricing Adjustments: As taxing rights are reallocated or challenged under DST regimes, transfer pricing models may require review and restructuring.
– Jurisdictional Coordination: Finance and tax departments must coordinate to handle parallel systems of reporting and compliance.
– Ongoing Monitoring: Firms must track legislative developments, model exposures, and ensure their ERP and compliance systems are updated accordingly.

Forms may be required and could include: Local GloBE return templates. Country-by-country reports (CbCR) and supporting transfer pricing documentation

Uncertainty Remains

Key uncertainties and risks include:

•  Lack of U.S. Alignment: The U.S. exit leaves a major gap in enforcement, diminishing Pillar One’s effectiveness and increasing the risk of unilateral measures.
• Differing Timelines and Interpretations: Countries implementing Pillar Two may adopt divergent standards, deadlines, and thresholds.
• Future Political Shifts: A change in U.S. administration or congressional priorities could reopen negotiations or lead to selective re-engagement.
• Dispute Resolution Challenges: Without a unified framework, the risk of double taxation and treaty conflicts rises significantly.

Conclusion | OECD

The OECD’s two-pillar framework represents a bold attempt to recalibrate international taxation for the 21st century. In 2025, Pillar Two is progressing through domestic legislation, while Pillar One remains mired in geopolitical and technical hurdles.

For multinational corporations, this evolving environment demands vigilance, adaptability, and robust tax governance. Key actions include conducting jurisdictional impact assessments, enhancing reporting capabilities for GloBE compliance, reviewing global tax strategies for resilience against DSTs and unilateral measures and monitoring diplomatic and legislative developments.

As the global consensus remains fragile, firms must remain proactive in their cross-border tax planning.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. For personalized guidance, the experienced International Tax attorneys at RJS LAW are well versed in current global tax regulations and can help you understand changing tax laws and structures to accomplish your long-term goals. For a no cost consultation, please visit us on the web at RJS LAW or call 619-595-1655.