PARIS: One of the two pillars of a global corporate tax overhaul due to come into force next year is at risk of collapsing as plans over how to share taxing rights on the 100 biggest, most profitable multinationals fall victim to domestic US politics.

Nearly 140 countries are supposed to start implementing from next year a 2021 deal rewriting outdated rules of international taxation to deter multinational companies like Alphabet’s Google or Amazon from booking profits in low-tax countries.

The deal, aimed in particular at mainly US-based digital giants, is built on a first pillar that aims to reallocate taxing rights on about $200 billion in profits from the companies to the countries where they do business.

The second pillar aims to end a decades-long race to the bottom on tax rates. It tries to ensure companies with revenue greater than 750 million euros ($820 million) pay a global minimum rate of 15 per cent by allowing governments to apply a top-up tax on revenues earned in countries with lower rates.

“Pillar I has a much rockier path forward. Indeed it is quite likely that it will ultimately fail,” said tax lawyer Peter Barnes, who heads industry forum the International Fiscal Association.

Countries had originally hoped to have a high-level signing ceremony in July for a new multilateral treaty — needed to redistribute taxing rights. But officials now say the hope is simply to have a viable text ready by then as ironing out some countries’ concerns proves tricky.

Even if the details are hammered out by July and G20 leaders sign off on the treaty at a summit in September, some officials said Republican opposition and a lack of Democratic enthusiasm spells trouble for its ratification in the US Congress.

Published in Dawn, June 18th, 2023