Global Minimum Tax Agreement reached by G7


On June 5, 2021, the G71 agreed to global tax reform measures targeting large international companies. The tax reform aims to: a) tax multinationals in the countries where they operate; and b) subject multinationals to a global minimum tax rate of at least 15% (the June 5 Agreement).

The G7 also agreed to investigate mandatory climate report and combat ‘proceeds of environmental crimes’. This measure is not discussed in this article.


The June 5 Agreement is further progress on the OECD’s ‘Tax Challenges Arising from Digitalisation’, which introduced Pillar One and Pillar Two. A summary of both Pillars is below, though further details are available in RSM Article How OECD Pillar One could change international tax processes for MNCs.

  • Pillar One: Aims to provide new methods for profit allocation and revise nexus rules (i.e., change the taxation rights of countries). 
    • The June 5 Agreement indicates that multinationals with at least a 10% profit margin would see 20% of their profit margins above the 10% reallocated and subject to tax in countries where they operate. 
  • Pillar Two: Aims to introduce a global anti-base erosion mechanism ensuring multinationals pay a minimum level of tax.
    • The June 5 Agreement indicates a global minimum tax of at least 15%. 

The June 5 Agreement aligns with Pillar One and Two’s objectives, though appear simpler, which is welcomed if this remains true. The authors’ key questions going forward include:

a) Whether or not exclusions based on size or industry will exist? Pillar One contemplates industry exclusions and the language used in the June 5 Agreement appears targeted at the “largest multinationals”. Further, the original Pillar One and Two includes country-by-country reporting, which only impacts multinationals with income in excess of €750 million. RSM believes a similar exclusion could exist to mitigate application of onerous tax rules on medium and small companies. 

b) Seeking agreement on a calculation to equitable distribute earnings above the 10% profit margin may be challenging, though a formulaic approach that brings certainty would be welcomed by individuals responsible for corporate tax governance. 

Impact on Digital Service Tax 

Globally, RSM has seen a rise in Digital Sales Tax (DST), including the Canadian federal DSTs that will take effect on July 1, 2021. 

The G7 noted DST is a temporary solution. The UK reaffirmed its commitment to remove its DST once Pillar One rules take effect. RSM believes other countries will follow suit. 

Next Steps

During their meeting in July, the G20 Financial Ministers & Central Bank Governors will continue to discuss tax reform. 

The OECD previously targeted an effective agreement date during 2020, but was delayed due COVID-19. Given the June 5 Agreement, RSM believes agreement during 2021 or early 2022 is likely.

Read what our colleagues at RSM US are also saying about the G7 agreement.


1Specifically, this included the United Kingdom, Canada, France, Germany, Italy, Japan, the United States and the EU. The IMF, World Bank Group, OECD and FSB where also represented.


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Maria Severino

National Tax Leader

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