On 8 October 2021, 136 countries agreed to a set of global tax reforms under the Inclusive Framework on Base Erosion and Profit Shifting (BEPS), an initiative led by the G20 and the Organisation for Economic Co-operation and Development (OECD). The reforms, which have been developed over several years, were initially intended to address the tax challenges arising from the digitalisation of the economy, but have wider implications for both digital and non-digital businesses in countries around the world.

In this paper, we look at why a global deal was needed, explain how the reforms are likely to work in practice and set out the potential impacts of the global deal, with a focus on lower-income countries. We find that the reforms are significant but do not fundamentally change the international tax system, as other proposals would have done. The revenue impacts are uncertain but could be relatively modest. Tax competition and tax avoidance will continue. Lower-income countries can benefit from the reforms but will need to continue to build capacity to tackle international tax avoidance.

Working Paper by the Overseas Development Institute