Compliance Challenges of the BEPS Two-Pillar Solution

British Tax Review (2022) issue 5

39 Pages Posted: 13 Jan 2023

See all articles by Chris Noonan

Chris Noonan

University of Auckland - Faculty of Law

Victoria Plekhanova

Massey University - Massey University Auckland

Date Written: December 16, 2022


After almost a decade of debate on the appropriate response to the tax challenges of digitalisation, an answer appears to have been found in the form of the Two-Pillar Solution (TPS). The TPS is a complex package, which foresees new binding and non-binding international instruments, amendments to hundreds of existing tax treaties, and enactment of new national tax laws. Developed by the OECD with the involvement of other participants in the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) project, the TPS has received mixed reactions. Concerns have been raised about the implementation, coherence, and fairness of the rules of the TPS. Drawing on insights from other areas of international economic law and international relations, this article suggests that a fuller understanding of the likely impact of the TPS requires looking beyond the four walls of the TPS documentation. With time to assess the likely impact and to contemplate the legal basis and sequencing of the implementation of the components, the enthusiasm of states to endorse the October 2021 Statement on the TPS may not carry through to its implementation and compliance. State interests, international institutions, perceived legitimacy and administrative capacity will impact upon both. The authors conclude that there are reasons to doubt both broad and high levels of implementation and compliance and ultimately the sustainability of the TPS in the longer-term.

Note: “This material was first published by Thomson Reuters, trading as Sweet & Maxwell, 5 Canada Square, Canary Wharf, London, E14 5AQ, in the British Tax Review as Compliance Challenges of the BEPS Two-Pillar Solution [2022] B.T.R., No. 5 and is reproduced by agreement with the publishers”.

Keywords: international taxation, compliance, global tax governance, BEPS, Pillar One, Pillar Two, BEPS Action 1

JEL Classification: K33, K34, K49,

Suggested Citation

Noonan, Chris and Plekhanova, Victoria, Compliance Challenges of the BEPS Two-Pillar Solution (December 16, 2022). British Tax Review (2022) issue 5, Available at SSRN:

Chris Noonan (Contact Author)

University of Auckland - Faculty of Law ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

Victoria Plekhanova

Massey University - Massey University Auckland ( email )

Private Bag 102904
North Shore Mail Centre
Auckland, 0745
New Zealand

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