Corporates Can Find Ways to Maneuver Around Global Minimum Tax

The OECD’s global minimum tax was billed as a landmark change to curb corporate tax avoidance. A 15% effective tax rate on multinational groups with revenues over €750 million ($883 million) was supposed to reduce the advantages of shifting profits to low-tax jurisdictions.

Some 147 countries signed up to the framework, known as Pillar Two, but implementation remains uneven, with several jurisdictions yet to fully adopt the rules. Yet as implementation gathers pace, a more complex reality is emerging.

Companies are complying, but also adapting, restructuring, and in some cases sidestepping the spirit of the minimum tax.

Web of Compliance

Pillar Two doesn’t come with a central registration portal. Instead, the rules hinge on identifying the multinational group, its constituent entities, and the ultimate parent entity—typically responsible for filing the global anti-base erosion (GloBE) information return.

In practice, this means dealing with multiple tax authorities simultaneously. A UK-headed group, for instance, may file with the UK tax authority while complying with local minimum tax regimes elsewhere. Where information-sharing agreements fall short, local filing obligations multiply.

The result is less a unified global system than a coordinated but fragmented compliance exercise.

Building the Return

Behind the scenes, producing a Pillar Two return is a data-intensive undertaking. Companies must aggregate financial accounting data across jurisdictions, calculate GloBE income, adjust for covered taxes, and determine effective tax rates on a country-by-country basis.

From there, any shortfall below the 15% threshold triggers a top-up tax, allocated through a hierarchy of rules: the income inclusion rule first, followed by the undertaxed profits rule if necessary.

This isn’t a marginal compliance upgrade; it’s a fundamental redesign of corporate tax reporting. Many multinationals are investing heavily in tax technology and centralized data systems just to keep pace.

System Under Strain

The administrative burden is already becoming apparent. Companies face tight deadlines, inconsistent interpretations across jurisdictions, and the challenge of aligning accounting data with tax calculations.

Tax authorities, meanwhile, are under pressure to enforce rules that are highly technical and still evolving. The risk of disputes, and even double taxation, is rising.

At the core of the challenge is complexity. The GloBE framework spans income adjustments, deferred tax mechanisms, and allocation rules that go well beyond traditional tax compliance. For many groups, the biggest hurdle isn’t tax planning—it’s simply getting the numbers right.

Temporary Escape Route

To ease the transition, the Organization for Economic Cooperation and Development introduced safe harbors that allow companies to bypass full calculations under certain conditions.

The most widely used is the country-by-country reporting safe harbor, which relies on existing disclosures to determine whether further analysis is needed. There also are simplified calculation methods, de minimis thresholds, and protections where domestic minimum taxes apply.

For now, these provisions are acting as a pressure release. But they create planning opportunities, and companies are positioning themselves to take maximum advantage.

Shift in Corporate Strategy

If Pillar Two was meant to end tax competition, it hasn’t; it’s simply changed the rules.

Instead of chasing the lowest possible tax rate, companies are now targeting an effective rate just above 15%. The goal is no longer minimization, but optimization: Pay enough tax to avoid top-ups, but no more than necessary.

This has triggered a wave of organizational restructuring. Some groups are relocating profits or adjusting transfer pricing policies. Others are increasing real economic activity in certain jurisdictions to benefit from the “substance-based income exclusion,” which reduces exposure to top-up tax based on payroll and tangible assets.

Tax functions also are being centralized, with compliance elevated to a strategic priority at board level.

New Tax Competition

Governments, too, are adapting. Traditional tax havens, offering very low tax rates, are losing their appeal. But competition hasn’t disappeared; a new generation of “soft tax havens” is emerging. These jurisdictions maintain nominal tax rates around 15% while offering incentives, such as tax credits or subsidies, that reduce the real economic burden without triggering Pillar Two liabilities.

The introduction of qualified domestic minimum top-up taxes has added another dimension. By implementing their own minimum taxes, countries can ensure any top-up is collected locally rather than ceded to another jurisdiction.

In effect, the battleground has shifted from headline tax rates to the design of tax systems themselves.

Loopholes or Design?

Despite its anti-avoidance ambitions, Pillar Two leaves room for maneuvering.

The substance-based carve-out is a prime example, allowing companies to reduce their tax base by increasing payroll or tangible assets. Timing differences, particularly those linked to deferred tax accounting, offer another lever. By smoothing tax rates across periods, companies can avoid triggering top-up taxes in specific years.

There is also scope for “blending” within jurisdictions, where high-tax and low-tax entities offset each other. Combined with strategic use of safe harbors, these mechanisms mean that effective tax rates can still be managed, albeit within tighter boundaries.

For years, multinationals have faced scrutiny for reporting low profits in high-tax countries. The playbook typically involved transfer pricing, royalty payments to intellectual property hubs, and intra-group financing structures.

Pillar Two doesn’t eliminate these strategies, but it does blunt their impact. By focusing on effective tax rates at the jurisdictional level, the rules ensure that low-tax outcomes are offset elsewhere.

Still, accounting adjustments and operational structuring leave room for companies to influence how profits and taxes are ultimately paid.

System Taking Shape

Pillar Two marks a turning point in global tax policy. It shifts the focus from where profits are booked to how they are taxed, introducing a level of coordination that would have been unthinkable a decade ago.

But it’s far from finished. Implementation is uneven, guidance is evolving, and both companies and governments are learning in real time.

For multinationals, the challenge is no longer just tax efficiency: it’s navigating a regime where compliance, strategy, and geopolitics are increasingly intertwined.

For policy makers, the question remains: has the global minimum tax ended aggressive profit shifting, or simply started a more sophisticated version of it?

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Karen Nally is head of tax at Unite, the largest trade union in the UK and Ireland with members across the private, public and voluntary sectors.

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