The OECD's Pillar Two global minimum tax raised between €79 billion and €109 billion in its first year of operation. That sounds substantial until it is set against what the OECD itself predicted. The 2024 revenue figure represents roughly 2.4% to 3.4% of global corporate income tax revenues, against a projection of 9% made only two years earlier. The shortfall is not a rounding error. It is a structural problem, and it raises serious questions about the design and ambition of the entire project.
A forecast that was always moving
The OECD's revenue estimates for its international tax reform have shifted dramatically at each iteration. In 2020, the organisation estimated that the full two-pillar plan would generate around 4% of global corporate income tax revenues. By January 2023, a revised press release put Pillar Two alone at 9%, described at the time as better than expected. A 2024 OECD publication revised that down to a range of 6.5% to 8.1%. The latest figures, covering actual 2024 revenues, land between 2.4% and 3.4%.
Each successive estimate has been lower than the last. The trajectory matters as much as any individual number.
The early models were optimistic by construction. They drew on older datasets that overstated the scale of profit shifting among multinational enterprises. They assumed near-universal adoption of the new rules across jurisdictions. And they did not adequately account for the carve-outs and safe harbours that any globally negotiated political compromise was always going to require.
Implementation has been partial at best
Of the roughly 140 jurisdictions originally engaged with the OECD process, only around 55 have begun implementing the Pillar Two rules. That is considerably fewer than the near-universal adoption the original projections assumed. The rules that have been enacted are further narrowed by multiple income exclusions, including the substance-based income exclusion (SBIE), and by a range of transitional safe harbours that significantly limit the tax's practical reach.
Most consequentially, global profit shifting declined over the preceding decade, well before Pillar Two came into force. That decline simultaneously reduces the pool of revenue available and weakens the central rationale for building a sprawling multilateral minimum tax regime in the first place.
National revenue forecasts compounded the problem in a different direction. Several foreign treasuries projected meaningful receipts from the undertaxed profits rule (UTPR) and the income inclusion rule (IIR) as applied to US multinationals. That revenue was always uncertain. Either the United States would tighten its own minimum tax rules, keeping the tax base at home, or it would maintain or strengthen the existing GILTI and NCTI framework in preference to the OECD rules. In the event, the latter occurred. The US has not adopted Pillar Two, and its existing net controlled-foreign-corporation tested income (NCTI) regime applies additional home-country tax when foreign income falls below a minimum rate. Foreign governments collecting meaningful sums from US multinationals was never a realistic prospect under either scenario.
Investment effects are deferred, not absent
The OECD's economic impact assessment reports no measurable decline in investment or employment among targeted companies in 2024. The OECD presents this as broadly reassuring. It should be read with care.
First-year results reflect a tax that was only partially in force across a limited number of jurisdictions, with transitional safe harbours still shielding large portions of the multinational population. The absence of a detectable first-year effect is neither surprising nor conclusive.
The structural design of the SBIE means that the tax currently bears most heavily on profits from intangible assets, because payroll and tangible assets generate the exclusion that reduces exposure. Physical investment and employment are partly insulated for now. But the carve-out percentages are scheduled to decline over time, and research commissioned by the European Commission has argued for eliminating the exclusion entirely. As the SBIE shrinks, the tax will increasingly penalise real investment, not just mobile intangible income.
The OECD's own report acknowledges that other research contradicts its reassuring conclusions. The assessment estimates an effective tax rate increase of 1.7 percentage points across targeted companies. Applying standard empirical estimates of how corporate tax rates affect investment implies a reduction in investment of around 8%. Prospective investment effects are also flagged in separate OECD research and in a UN Conference on Trade and Development report.
Was coordinated action necessary?
The OECD's own data raise an uncomfortable question: was an internationally coordinated regime required to achieve the outcomes attributed to it?
The largest increases in effective tax rates documented in the assessment occurred among multinationals subject to a domestic income inclusion rule in their home jurisdiction. Companies outside an IIR showed smaller increases, with less statistical confidence. This pattern suggests that domestic minimum taxes, adopted unilaterally by residence countries, drove most of the measurable effect.
The findings for US multinationals reinforce that reading. Removing US companies from the sample actually increased the estimated effect on effective tax rates, implying they were already subject to higher tax burdens before Pillar Two. The OECD itself suggests this reflects the US's separate top-up system, in place since 2017, and the operation of transitional safe harbours. The side-by-side treatment of US firms, exempting them from certain Pillar Two top-ups in recognition of their existing NCTI obligations, does not appear to have materially weakened the minimum tax's measured effect.
The implication is that individual governments, acting through their own residence-based minimum tax rules, could have produced similar rate increases without the apparatus of overlapping domestic rules, undertaxed-profit rules, and international reporting regimes that Pillar Two entails. The OECD constructed a complex multilateral framework to achieve an outcome that unilateral domestic legislation largely could have delivered.
What the shortfall means in practice
None of this means Pillar Two has failed entirely. It has raised revenue, increased effective tax rates on some multinationals, and established a baseline level of taxation across participating jurisdictions. But the gap between successive OECD forecasts and actual performance is now too wide to attribute to normal modelling uncertainty.
Revenue projections moved from 4% to 9% and back to under 3.5% of global corporate tax receipts across successive OECD publications. Adoption has reached only around 55 of 140 jurisdictions. The tax operates most heavily on intangible income, with physical investment currently sheltered by a carve-out that is itself under political pressure. And the coordinating role of the OECD may have added compliance costs and legal complexity without proportionate benefit, given that residence-country minimum taxes appear to have driven the largest documented rate effects.
Practitioners advising multinational groups should note that the safe harbour and carve-out landscape will continue to evolve. The SBIE reduction schedule, and any political pressure to accelerate or deepen it, deserves close attention in the coming years. So does the treatment of US multinationals as the relationship between NCTI and Pillar Two continues to be tested.
Primary sources
- OECD Economic Impact Assessment of the Global Minimum Tax 2026
- OECD: MNE Responses to the Global Minimum Tax
- OECD: The Global Minimum Tax and the Taxation of MNE Profit (2024)
- OECD Press Release: Revenue Impact of International Tax Reform, January 2023
- OECD: Tax Challenges Arising from Digitalisation, Economic Impact Assessment (2020)
- UNCTAD: World Investment Report 2022
- EU Tax Observatory: Substance Carve-Outs (Note no. 1)