The global minimum tax is bruised but very much alive and kicking

January 19, 2026 | News |

Don’t believe the hype – the global minimum tax may have taken a few knocks, but it is still advancing and there is much to celebrate.

There has been much lamentation at the announcement on the 5th January 2026 that the 147 countries and jurisdictions that are working together within the OECD Inclusive Framework would grant the United States a ‘Side-By-Side (SBS) Arrangement’ to the 15% global minimum tax that is advancing across the world.

At one end of the political spectrum there are those who say that this a ‘complete sell-out’ and means that US multinationals are no longer subject to the OECD’s global minimum tax anywhere in the world, which will lead to a massive reduction in corporate income tax revenues raised across Europe and in the UK.

Conversely, there are voices bemoaning the fact that the concept of a global minimum tax has not received a stake through the heart in order that nations can re-continue their global race to the bottom on corporate income tax.1

As with most things in life, the truth lies somewhere in the middle. There is much to celebrate and much that needs to be improved. 

The global minimum tax will still raise substantial sums across the world, but perhaps c. 25-30% less than previously estimated. US multinationals will still be subject to the global minimum tax across much of the world. The biggest loser will be the US, which has opted to leave tax dollars on the table, and allow no-one else to claim them. This doesn’t make for great headlines or mobilise membership bases, but it is true nonetheless.  Moreover, real world politics meant that the emergence of a side-by-side agreement with the US was probably necessary and is something that we, and others, predicted would manifest a year ago.

Which goes a long way to explain why all of the 147 countries working within the OECD Inclusive Framework agreed the side-by-side arrangement with the US – albeit reluctantly; including India, China and a host of developing nations. It would be a falsehood to characterise the arrangement as simply a stitch-up between a craven, faceless OECD and the US.

However, before we get into the detail of what has been agreed, it is worth pausing and looking back to how we got here. Especially as the idea that the world would agree a corporate global minimum tax was the stuff of fairy-tales not too long ago.

The Fair Tax Foundation’s support for a global minimum tax goes way beyond the vital revenues it will raise. We believe that it will be a crucial lever to level the playing field between tax dodgers and businesses that can’t, or won’t, engage in profit-shifting and aggressive tax avoidance. There are many, many businesses across the world that seek to abide by both the spirit and the letter of tax law. They should be celebrated, not rendered at a competitive disadvantage.

What is the OECD’s global minimum tax?

The OECD’s Pillar Two Global Anti-Base Erosion (GloBE) rules impose a global minimum tax of 15% on large multinational enterprises (MNEs) in respect of the corporate profit arising in each jurisdiction where they operate.2

The rules create a pecking order for jurisdictions to apply corporate top-up taxes if MNEs are paying less than the 15% threshold, based on the following:

  • Qualified Domestic Minimum Top-Up Tax (QDMTT) 
  • Income Inclusion Rule (IIR)
  • the Undertaxed Profits Rule (UTPR)

The application of the rules is highly complex, but essentially they cleverly incentivise countries to introduce top-up taxes on MNEs operating in their locale that are paying less than the 15% threshold – because if they don’t, someone else likely will.

So, if a MNEs home country doesn’t apply the IRR, other countries where the group operates may apply the UTPR. To ensure first place in the queue, dozens of countries have quickly progressed a QDMTT.

The OECD has estimated, prior to the SBS Arrangement, that a global minimum corporate income tax set at 15% would reduce global low-taxed profit by 80%, raise an estimated US$155-192bn of additional tax revenue, reduce tax rate differentials across countries and potentially improve the allocation of global capital.3

Corporate global minimum tax – going nowhere fast for many a year

When it came to international tax rules, for much of its history, the OECD concentrated their effort on ensuring that multinational companies were not subject to double taxation. It was largely silent on the growing evidence of corporate tax abuse that was building across the world, particularly in relation to transfer pricing abuses and the advent of tax havens. But in April 1998, the OECD published Harmful Tax Competition: An Emerging Global Issue. This report was a radical departure (in terms of tone and substance) from anything the OECD had previously advocated in terms of challenging tax abuses. It proposed sanctions against tax havens if they failed to collect and share information upon request about individuals and corporations attempting to evade or avoid income taxes. It also set criteria for the legitimacy of claims about corporate location. A firm could claim location in a tax haven only if it had ‘substantial’ activity there. Unfortunately, the proposals met significant resistance (most particularly from the United States) and the whole project was quickly neutered and rendered dormant.4

It needs to be remembered that this was a time when there was little or no major interest in the subject of corporate tax avoidance, with the exception of a very small number of development charities, such as Oxfam – albeit an international tax justice movement grew quickly in later years.5 It required the global financial crisis of 2008, and a parallel public uproar that followed a swath of corporate tax scandals, for the world’s major nations to wake-up to the need for a reconsideration of international tax rules that were plainly not fit for purpose.

Progress ground forward in many areas from 20136, but the idea of a global minimum tax was treading water until, ironically, the United States, under Joe Biden, lit a fire under stalled discussions in 2021 and the world quickly moved to agree a global minimum tax, under the auspices of the OECD.

Suddenly, a window of opportunity opens and the global minimum tax is breathed into life in 2021

In early 2021, as the world was recovering from the economic impact of the covid epidemic, major economies were looking at means to raise new revenues quickly. The Biden administration shifted US policy and explicitly endorsed a 21% global minimum rate, which was subsequently agreed in the summer by 130 countries, but at a reduced rate of 15%.7 The Fair Tax Foundation was an early supporter of, and mobiliser for, the global minimum tax in the UK. Unfortunately, the Biden administration never managed to pass the OECD’s global minimum tax through the US Congress as they deemed the UTPR to be extraterritorial. This was disappointing, but not disastrous, as the US was already operating a crude global minimum tax on it’s multinationals (a tax on global intangible low-taxed income, or GILTI), albeit based at a lower rate (10.5%) and it was blended (so payments in a high tax country could be used to offset payments in a low tax country).

However, the US’s stalling hasn’t stopped sixty other countries from getting on with the task of implementing the global minimum tax in their jurisdictions, including most of the EU’s 27 Member States, the UK, Australia, Brazil, Canada, Indonesia, Japan, Norway, South Korea, South Africa and Viet Nam. They have been particularly keen to establish domestic minimum top-up taxes (QDMTTs) set at 15%, which not only apply to MNEs but also to large domestic business as well (provided they meet the Pillar Two size threshold).8 We are even seeing some notorious tax havens that previously operated 0% corporate income tax progress a 15% QMDTT, such as Barbados, Guernsey, Isle of Man and the United Arab Emirates!

Problems arise in 2024 with the election of President Trump

On 5th November 2024, Donald Trump was elected US President, for a second time. One of his first acts was to issue an executive order pulling the US out of the OECD’s global minimum tax deal, saying: “The OECD Global Tax Deal supported under the prior administration not only allows extraterritorial jurisdiction over American income but also limits our Nation’s ability to enact tax policies that serve the interests of American businesses”.

However, as part of the ‘One Big Beautiful Bill Act’ of 2025, he maintained, renamed and increased the US’s own global minimum tax. The tax on Net Controlled Foreign Corporation Tested Income (NCTI) replaced the GILTI and was raised to 12.6-14%.9 The Corporate Alternative Minimum Tax (CAMT) of 15% was also continued, which applies to large business and was introduced by the Biden Administration in 2022, and is based on book profits.

The Side-by-Side Agreement of 2026 is an ugly compromise, but keeps the global minimum tax alive and moving forward

The side-by-side arrangement that has been agreed between the 147 countries of the Inclusive Framework and the United States is an ugly political fudge to be sure. It can be argued that it is not fair that US MNEs are subject to less tax than, for example, European MNEs. That they have more scope to use tax havens, as they can blend profits from high-tax jurisdictions with those from low tax jurisdictions. That they benefit more than anyone from the change to how non-refundable tax credits will now be treated.

But the biggest loser from this, revenue wise, is the US (as cogently argued by the FACT Coalition). Furthermore, whilst the SBS means that US MNCs are not subject to the IIR and UTPR, the arrangement cements in the QMDTTs that are popping up all over the world and which most certainly apply to US MNEs. Throw in the already established Diverted Profits Tax that applies in jurisdictions such as the UK (which is set at a penalty rate of 31%, of profits)10, and it quickly becomes clear that talk of US subsidiaries not paying any global minimum tax across Europe due to the new SBS arrangement are wild exaggerations.

The OECD say that the SBS agreement will not lead to a significant global reduction in the revenues raised by their global minimum tax, although they have yet to provide detailed modelling to substantiate this. This is based on the contention that qualified domestic minimum top-up tax regimes are the primary mechanism in the global minimum tax framework for ensuring the protection of national bases, and these remain undiluted.11

Moreover, in a shrewd move the SBS package contains “an evidence-based stocktake process to ensure a level playing field is maintained for all Inclusive Framework Members”, which is scheduled for 2029 – i.e., there will be a nuts and bolts review shortly after the next US Presidential election in November 2028.

The glass is at least half full

It is easy to bemoan where the OECD global minimum tax falls short, and what it fails to achieve. At the Fair Tax Foundation, we have been critical ourselves in recent years.

There are suggestions that if the same countries negotiated under a different umbrella than the OECD, then a very different outcome would emerge. This is hard to envisage at the moment, when it seems that securing meaningful multilateral agreement on anything has not been as difficult in many a year.12

The latest data shows that the contribution made by corporate income tax is growing again, and is now the highest it has been this century. The global race to the bottom on headline corporate income tax rates that took place over recent decades looks to have ended, with hints that it may even be reversing. The average rate of corporation tax has just increased for a third year, as we set out in Why Corporate Income Tax is the most critical of all taxes. The advent of the 15% global minimum tax is helping, not hindering, this reverse.

Without doubt, the credibility of the global minimum tax has been bruised by recent developments. But, it is very much alive and kicking, and this is to be celebrated. The stocktake planned for 2029 will provide an opportunity to look afresh at the fairness of the outcome arrived at, and whether the global minimum tax is delivering on the aim of curtailing profit-shifting. 

The voice of responsible business is not heard enough

The global minimum tax is now in full swing in many countries and top-up payments can be clearly discerned in the Annual Reports of numerous multinationals. The sums involved are, by and large, not enormous. We’ve yet to see them warrant a substantial discussion in the financial statements of a single company to date.

There are, of course, regressive lobbying bodies who treat every dollar of tax as a dollar too much. However, there are also countless businesses on record who welcome the advent of a global minimum tax and the end of the race to the bottom that has been underway in recent decades.

Progressives recognise that the steady global decrease in headline corporate tax rates over recent decades, combined with an almost daily reportage of corporate tax scandals, has eroded public trust in the fairness of the tax system in many parts of the world, with significant consequences for morale and compliance. This hurts all sectors of society.

The Fair Tax Foundation’s support for a global minimum tax goes way beyond the vital revenues it will raise. We believe that it is a crucial lever to level the playing field between tax dodgers and businesses that can’t, or won’t, engage in profit-shifting and aggressive tax avoidance. There are many, many businesses across the world that seek to abide by both the spirit and the letter of tax law. They should be celebrated, not rendered at a competitive disadvantage.

We look forward to the global minimum tax going from strength to strength.

Also read Why Corporate Income Tax is the most critical of all taxes and Public Country-by-Country Reporting: why and how

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  1. For example, the Cato Institute complains that: “The US hasn’t formally adopted Pillar Two, but the side-by-side agreement quietly imports its legislative straitjacket through the back door… it doesn’t preserve congressional sovereignty over domestic tax laws; it constrains it… the agreement’s statutory and effective tax rate safe harbors lock in current tax rules, binding future Congresses to a narrow range of acceptable tax policies”.
  2. Applies to large MNE groups with annual consolidated revenues over €750m in at least two of the four preceding accounting years
  3. See https://www.oecd.org/content/dam/oecd/en/publications/reports/2024/01/the-global-minimum-tax-and-the-taxation-of-mne-profit_2c3d9f9d/9a815d6b-en.pdf
  4. See Robert T. Kudrle (2008). The OECD’s Harmful Tax Competition Initiative and the Tax Havens: From Bombshell to Damp Squib. Global Economy Journal, Vol. 8, No. 1, 1850128 (2008). https://www.worldscientific.com/doi/10.2202/1524-5861.1329
  5. As set out in The Essential Elements of Global Corporate Standards for Responsible Tax Conduct (June 2020).
  6. In 2013, the G20 tasked the OECD with leading a Base Erosion and Profit Shifting Project to tackle corporate tax planning strategies that exploit gaps in international rules to make profits ‘disappear’ or that shift profits to tax havens. See Action Plan on Base Erosion and Profit Shifting. 
  7. See https://bidenwhitehouse.archives.gov/briefing-room/statements-releases/2021/07/01/statement-by-president-joe-biden-on-todays-agreement-of-130-countries-to-support-a-global-minimum-tax-for-the-worlds-largest-corporations/
  8. As is the case across the European Union and in Canada and the UK. See the OECD’s Central Record for purposes of the Global Minimum Tax.
  9. The tax on Net Controlled Foreign Corporation Tested Income (NCTI) is 12.6% (but “14%” is the effective foreign tax rate a US MNE must pay to have its US tax liability fully offset by foreign tax credits). The NCTI applies to all MNEs – i.e., no €750m revenue threshold, as per the the OECD GMT.
  10. The Diverted Profits Tax seeks to counteract contrived arrangements used by MNEs to artificially divert profits from the UK. It was introduced in Finance Act 2015. It acts at a higher rate (31%) than standard corporation tax (25%) to encourage compliance. It is in the process of being phased out as a separate charge, but only to be replaced by a similar regime that is referred to as the ‘Corporation Tax charging provision for unassessed transfer pricing profits (UTPP)’.
  11. It is difficult to envision no impact, especially as the SBS Agreement introduces a new category of allowable ‘substance-based tax incentives’ that will not be deemed to reduce the effective tax rate for the purposes of top-up tax calculations, albeit there are capping mechanisms. This shift, to accommodate the US, could open up a new era of negative tax competition. See Has the global minimum tax survived Trump? Furthermore, recent impact assessments of the SBS Arrangement in the Netherlands and the UK indicate a 26% and 30% impact, respectively.
  12. None of which detracts from the important work underway at the United Nations to establish a Framework Convention on International Tax Cooperation. Work began in 2024, with the aim to agree a Framework Convention in September 2027, alongside protocols on the ‘Taxation of Income Derived from the Provision of Cross-Border Services’ and ‘Prevention and Resolution of Tax Disputes’. As yet, no substantive work is underway to advance an alternative to the ‘OECD global minimum tax’, and the very premise of such a measure is being contested by some UN Member States (for example, Saudi Arabia and Czechia). A working draft of the Framework Convention is available here (as at October 2025).