SC & G-24 Special Issue 1, July 2025
Comparison of Tax Revenue Effects of United Nations and OECD Subject to Tax Rule for G-24 and South Centre Member States
By Faith Amaro and Sol Picciotto
The Subject to Tax Rule (STTR) seeks to address the historical imbalance in the allocation of taxing rights under international tax treaties by introducing within existing treaties a new article which makes the restrictions on source taxation conditional on the residence jurisdiction imposing a minimum level of tax on foreign-derived income. This paper presents a methodology for analysing the respective benefits of the STTRs developed by the Organisation of Economic Co-operation and Development (OECD) and the United Nations (UN). Applying this model to publicly available data for 2021, it also provides estimates of the possible revenue impact for the 65 Member States of the South Centre (SC) and the Intergovernmental Group of 24 (G-24). Our analysis indicates that the OECD STTR would have no impact on any OECD country treaty with a SC/G-24 Member State. Applying the prescribed 9% minimum rate to covered payments, only 100 treaties across 28 SC/G-24 Member States would qualify for improvement under the OECD STTR, with an estimated combined revenue gain of USD 55.6 million, 71% of which is concentrated in just five treaties. In contrast, the UN STTR, which does not specify a minimum rate, was modelled using rates of 9%, 10% and 15%. This resulted in estimated revenue gains of USD 212 million, USD 325 million, and USD 1,165 million across 171, 210 and 317 treaties, respectively. Given its complexity and restrictive scope, it seems pointless for any SC/G-24 Member State to join the OECD STTR. Instead, countries should focus on identifying treaties that cause unjustifiable revenue losses and consider revising them – either by adopting the simpler and broader UN STTR or implementing other measures such as active anti-abuse provisions to combat treaty shopping and tax avoidance.
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This article was tagged: Global Minimum Tax, Global Tax, Global Taxation, Intergovernmental Group of Twenty Four (G-24), International Tax, International Tax Cooperation, International Tax Reform, International Taxation, Organisation for Economic Co-operation and Development (OECD), Pillar Two, Subject to Tax Rule (STTR), Tax, Tax Cooperation, Tax Law, Tax Policy, Tax Reform, Tax Revenue Mobilization, Taxation, Taxing Rights, United Nations (UN)
