Tax risk is rising in the wake of last year’s agreement by G20 countries and the OECD to adopt a minimum corporate tax rate of 15 per cent for global businesses. 

The agreement is known as Pillar 2 of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. Pillar 2 is now enshrined in a European Directive.

Improving tax governance

In a recent survey by the consultant EY, 84 per cent of respondents said that implementing or improving an existing global framework approach to tax risk and controversy management would add “some or significant” value to their business in the next two years.

While corporate tax professionals expect audits of their tax frameworks to increase over that time, 70 per cent do not know what all of their ongoing tax disputes are. “This disconnect also has the potential to make it difficult to respond to new geopolitical, economic and tax policy changes that are adding unprecedented layers of tax risk that must be managed,” the report said.


The firm said that organisations must enhance tax governance strategies, define policies, roles, controls and accountabilities in clear, easily understood ways that better enable the effective management of both tax risk and tax controversy. 

In addition, they must alter their approach to tax and financial data management. Such systems should make it easy to respond accurately and in a timely way to ongoing reporting obligations. Such systems should also ensure that tax functions know about potential and ongoing tax disputes, mutual agreement procedures and tax litigation globally.

Finally, businesses need to both manage tax risks and take advantage of the many proactive dispute prevention and resolution programs offered by tax authorities. 


The Directive requires Member States to transpose the rules into domestic law by 31 December 2023. The main rule of the Directive (so called Income Inclusion Rule or IIR) will become effective on or after 31 December 2023 with the backstop rule (so called Undertaxed Profits Rule or UTPR) becoming effective on or after 31 December 2024.