Inclusive Framework Agreement on the Global Minimum Tax: Recommendations to address stabilized fiscal conditions

The policy brief examines the conflict between the OECD's Pillar Two Global Minimum Tax and 'fiscal stabilization' clauses, which are common in developing economies and can lock in tax incentives for decades. It argues that these clauses risk exposing governments to international arbitration if they raise taxes to meet the 15% minimum. The author recommends that OECD model legislation explicitly state that the global minimum tax applies regardless of stabilized incentives and that Inclusive Framework members agree that good-faith adjustments to align with GloBE rules do not constitute breaches of international law or investment treaties.

• Pillar Two of the OECD's Two-Pillar Solution establishes a global minimum effective tax rate of 15% for multinational companies, utilizing four 'GloBE rules'—the income inclusion rule, the switch-over rule, the undertaxed payments rule, and the subject to tax rule—to undermine tax competition by allowing jurisdictions to tax income that falls below this threshold.
• Fiscal stabilization clauses in domestic laws and investment contracts, which are primarily a problem for developing and emerging economies, may prevent governments from removing tax incentives or raising rates to align with the global minimum tax without risking lawsuits in international arbitration.
• The document recommends that OECD model legislation clearly state that the global minimum tax applies to all investments regardless of any tax rates or incentives that domestic laws, investment contracts, or treaties purport to stabilize.
• The author proposes that Inclusive Framework members agree that good-faith measures to implement GloBE rules should not be viewed as arbitrary, discriminatory, expropriatory, or a breach of international law, nor as a change in law constrained by fiscal stabilization provisions.

APA

Bernasconi-Osterwalder, N., Brewin, S., Nikièma, S., Lassourd, T., & Readhead, A. (2021). Inclusive Framework Agreement on the Global Minimum Tax: Recommendations to address stabilized fiscal conditions. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-11/inclusive-framework-agreement-global-minimum-tax.pdf

Chicago

Bernasconi-Osterwalder, Nathalie, Sarah Brewin, Suzy Nikièma, Thomas Lassourd, and Alexandra Readhead. Inclusive Framework Agreement on the Global Minimum Tax: Recommendations to address stabilized fiscal conditions. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-11/inclusive-framework-agreement-global-minimum-tax.pdf.

Wikipedia

{{cite report |last1=Bernasconi-Osterwalder |first1=Nathalie |last2=Brewin |first2=Sarah |last3=Nikièma |first3=Suzy |last4=Lassourd |first4=Thomas |last5=Readhead |first5=Alexandra |title=Inclusive Framework Agreement on the Global Minimum Tax: Recommendations to address stabilized fiscal conditions |publisher=International Institute for Sustainable Development |date=November 2021 |url=https://www.iisd.org/system/files/2021-11/inclusive-framework-agreement-global-minimum-tax.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bernasconiosterwalder2021inclusive, author = {Bernasconi-Osterwalder, Nathalie and Brewin, Sarah and Nikièma, Suzy and Lassourd, Thomas and Readhead, Alexandra}, title = {{Inclusive Framework Agreement on the Global Minimum Tax: Recommendations to address stabilized fiscal conditions}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = nov, url = {https://www.iisd.org/system/files/2021-11/inclusive-framework-agreement-global-minimum-tax.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }