Several places are already putting Pillar Two into action, and many governments want their plans to be accepted before the end of 2023. But it's hard to guess how Pillar Two will affect the government's income. Because of this, only a few countries have shared their results with the world.
After countries agreed on Pillar Two, the European Union passed an order in December 2022 that put the global minimum tax into effect. The Following Month, the Organization for Economic Co-operation and Development (OECD) Put Out Revenue Estimates to Figure Out How the Tax Really Affected Public Finances.
The goal of the world rules is to bring in more money, but the question is: how much? (This is very important because the new tax makes the country less competitive and less likely to attract investment.) According to the OECD, these rules will increase company tax revenue by 9%, which will bring in an extra USD 220 billion in tax revenue each year. The International Monetary Fund (IMF) doesn't agree with the OECD. It thinks that global corporate income tax revenue will rise by 5.7%, which is more than one-third less than what the OECD says.
It can be hard to guess how much new taxes will bring in, and lawmakers don't always know until after a new plan is put into action. Still, 11 countries have given their own predictions of how much corporate tax revenue will rise. These range from 0.8% in Australia to 4% in the UK. These figures are worth looking over, but they aren't always perfect because different countries use different methods.
The OECD's Pillar Two would generate some revenue for countries
Selected countries would see on average a three percent revenue increase
| Country | Annual estimated revenue, in billion USD | Percent increase in average corporate tax revenue |
|---|---|---|
| OECD estimate | 220 | 9 |
| IMF estimate | 139 | 5.7 |
| Australia | 0.250 | 0.8 |
| Belgium | 0.360 | 1.8 |
| Canada | 1.9 | 3 |
| Czech Republic | 0.225 | 2 to 3.1 |
| Denmark | 0.35 | 3 to 4 |
| France | 1.1 | 1.8 |
| Germany | 2.245 | 2.8 to 3.2 |
| Netherlands | 0.5 | 2 |
| Switzerland | 0.6 | 2.6 |
| United Kingdom | 2.7 | 4 |
Note: These are individual estimates using country specific or institution specific methodologies. Estimates are not perfect apples to apples comparisons, see blog text for further details.
Source: Individual country estimates and institutional estimates.
Austria
Austria officially showed off its draft federal law to implement Pillar Two in October 2023. Austria thinks that putting Pillar Two into place would bring in an extra EUR 100 million (USD 105 million) a year in business tax money.
Austria got an average of USD 10.7 billion a year in company tax revenue from 2016 to 2020. So, if Pillar Two were fully put into place, it would mean that corporations would pay an extra 1% in taxes every year.
Australia
Australia officially released its government budget in May 2023. It included estimates of how much money it would make from implementing Pillar Two. Australia thinks that Pillar Two will bring in AUD 370 million (USD 250 million) in business tax money over the next five years.
Australia got an average of USD 66.9 billion a year in company tax revenue from 2016 to 2020. If Pillar Two were fully put into place, it would mean that the average amount of company tax revenue would go up by 0.8% per year.
Belgium
Early in 2023, the Belgian government officially put forward a plan for the first part of its "broad tax reform." In the most recent budget agreement, Prime Minister De Croo said that putting Pillar Two into action would bring in an extra EUR 330 million (USD 360 million) a year in business tax money.
From 2016 to 2020, Belgium got an average of USD 19.4 billion a year in company tax money. Because of this, putting Pillar Two into full effect would mean an increase of 1.8% in the average amount of company tax revenue.
Canada
In its 2023 "Made-in-Canada Plan," the Canadian federal government estimated how much money Pillar Two would bring in. It thought that putting the plan into action across the whole country would bring in CAD 5.1 billion (USD 3.8 billion) in business tax money in the first two years. In fiscal year 2027, the Department of Finance will get CAD 2.8 billion, which is about USD 2 billion. In fiscal year 2028, it will get CAD 2.4 billion, which is about USD 1.8 billion.
From 2016 to 2020, Canada got an average of USD 63.6 billion a year in business tax money. This means that if Pillar Two were fully put into place, the average amount of company tax revenue would go up by 3 percent.
Czech Republic
To put Pillar Two into action, the Czech government has put out a draft of new laws. The bill will likely become law on December 31, 2023, even though it hasn't been talked over in Parliament yet. The Czech Finance Ministry thinks that putting Pillar Two into action will bring in between CZK 4 billion and CZK 6 billion (USD 180.5 million and USD 270.8 million) every year.
The Czech Republic got an average of USD 8.7 billion a year in company tax revenue from 2016 to 2020. Putting Pillar Two into place would lead to an average 2.1% to 3.1% rise in corporate tax revenue, based on the range of revenue.
Denmark
Pillar Two implementation laws are being written by the Danish government right now. The Danish Ministry of Taxation thinks this extra money will bring in between DKK 2 billion and DKK 3 billion a year, which is about USD 0.3 billion to 0.4 billion.
From 2016 to 2020, Denmark got an average of USD 10.1 billion a year in company tax money. When Pillar Two is put into place, the average amount of corporate tax revenue would go up by 3 to 4 percent, based on the range of revenue.
France
France was one of the first countries to back the Pillar One and Pillar Two proposals. In its official release of its 2024 Budget, France included estimates of the money it will need to pay for implementing Pillar Two. The French government thinks that putting Pillar Two into action will bring in EUR 1.5 billion (USD 1.58 billion) every year starting in 2026.
France got an average of USD 58.4 billion a year in corporate tax income from 2016 to 2020. If it were put into place at the national level, the average amount of company tax revenue would go up by 2.7%.
Germany
The German government is also writing Pillar Two implementation laws, which will probably include an official estimate of how much money will be raised. According to a study from the IFO institute in Munich in 2023, this extra money will bring in between EUR 1.9 billion and EUR 2.2 billion (USD 2.09 billion to 2.4 billion) each year.
Germany got an average of USD 74.1 billion a year in corporate tax income from 2016 to 2020. Putting Pillar Two into place would lead to an average 2.8% to 3.2% rise in corporate tax revenue, based on the range of revenue.
The Netherlands
In the fall of 2022, the Netherlands held a public meeting to talk about how to apply Pillar Two. The consultation included an assessment of how the EU's directive would be translated and put into practice, and it was thought that the consultation would bring in about EUR 0.4 to 0.5 billion (USD 0.5 billion) each year. Once the Netherlands turns in the transposition of the rule, a final estimate will be made, and the Central Planning Bureau will sign off on it.
The Netherlands got an average of USD 29.6 billion in company tax money from 2016 to 2020. So, putting Pillar Two into place would mean that average company tax revenue would go up by 2%.
Switzerland
To put Pillar Two into action, the Swiss Federal Council has suggested a new tax. The projected income in Switzerland is supposed to be split evenly among the federal government, the communes, and the cantons. According to a new plan from the Swiss Federal Department of Finance that looks at 13 out of the 26 Swiss cantons, putting Pillar Two into place would bring in more than CHF 350 million (USD 600 million) in extra tax money.
From 2016 to 2020, Switzerland got an average of USD 22.7 billion a year in company tax money. As a result, putting Pillar Two into place would lead to an average 2.6% rise in company tax revenue.
United Kingdom
In its 2022 Autumn Statement, the UK said that Pilar Two would bring in an extra GBP 2.3 billion a year by 2027–28, which is about USD 2.7 billion.
From 2016 to 2020, the UK got an average of USD 68 billion a year in company tax money. If Pillar Two were put into place across the whole country, it would mean an average 4% rise in company tax revenue.
| Year | 2022-2023 | 2023-2024 | 2024-2025 | 2025-2026 | 2026-2027 | 2027-2028 |
|---|---|---|---|---|---|---|
| Yield of Pillar Two (Millions of Pounds) | +0 | +335 | +2,110 | +2,085 | +2,155 | +2,255 |
| Source: 2022 Autumn Statement: Pillar 2 rules: UK implementation of global minimum corporate tax reforms from 31 December 2023 | ||||||
Conclusion
Several places are already putting Pillar Two into action, and many governments want their plans to be accepted before the end of 2023. But it's hard to guess how Pillar Two will affect the government's income. Because of this, only a few countries have shared their results with the world.
Since these estimates aren't 100% accurate, policymakers should be careful not to hurt their country's ability to compete and draw investment by putting in place Pillar Two rules in order to make money. It might not be possible to get a good picture of how these new rules affect income until years after they have been put in place.
For now, countries should keep looking at how the rules affect their tax revenues and the best ways to change their tax systems to encourage investment and growth.
