An international effort aimed at establishing a global minimum rate of taxation for multinational companies is nearing the end of its consultation phase.The Organisation for Economic Co-operation and Development’s Pillar Two proposal is intended to ensure that international companies cannot avoid paying tax entirely on any portion of their global profits.A period for public feedback on Pillar Two, also known as the Global Anti-Base Erosion (GloBE) proposal is set to close on Monday.Such changes would have implications for many international companies based in Bermuda, which has a zero rate of tax on profits.Bermuda is one of the 135 member countries of the OECD/G20 Inclusive Framework on Beps (Base Erosion and Profit Shifting), the organisation behind the initiative.Pascal Saint-Amans, the head of tax of the OECD, said at PwC/Irish Times tax summit in Dublin in September that the purpose of the Beps project was “to kill zero-tax jurisdictions or to make sure companies wouldn’t be able to locate profits in zero-tax jurisdictions, where nothing is happening”.Bermuda is one of many low-tax jurisdictions to have addressed issues of economic substance with legislation requiring that companies have “adequate” presence in terms of employee numbers, premises, local spending and decision-making related to core income-generating activities.Jude Scott, chief executive officer of Cayman Finance, a body that promotes the Caymanian financial-services industry, said this week that Cayman’s tax model was “directly under attack from Pillar Two”.The Cayman Compass quoted Mr Scott as saying: “We need to stand up and really involve ourselves in the process to show that the good model that we have is protected.” Cayman is also a member of the Inclusive Framework on Beps.Mr Scott suggested that Mr Saint-Amans’s statement reflected either a lack of understanding of zero-tax jurisdictions or a political directive to damage jurisdictions like Cayman and move business to other countries.In its Pillar Two consultation document, the OECD states: “A minimum tax rate on all income reduces the incentive for taxpayers to engage in profit-shifting and establishes a floor for tax competition among jurisdictions.”It adds: “The GloBE proposal is expected to affect the behaviour of taxpayers and jurisdictions. “It posits that global action is needed to stop a harmful race to the bottom on corporate taxes, which risks shifting the burden of taxes onto less mobile bases and may pose a particular risk for developing countries with small economies.”The OECD says its proposed changes will help to meet the challenges of the digitisation of the economy, which include modernising tax rules to ensure that tech giants pay their fair share of taxes in the countries where they make their money.Some countries have already imposed their own sales-based digital taxes, adding to the complexity of the international taxation system.However as professional-services firm EY observed in its commentary, “the proposals under Pillar Two represent a substantial change to the tax architecture and go well beyond digital businesses or digital business models”. EY added: “These proposals could lead to significant changes to the overall international tax rules under which multinational businesses operate.”The Pillar Two proposal is underpinned by four rules:• An income inclusion rule, which taxes foreign entity income if it is subject to an effective tax rate below the minimum rate• Undertaxed payments rule denies deductions on source-based taxation if payments are not subject to a minimum tax rate• Switch-over rule for tax treaties permits residence jurisdictions to switch from an exemption to a credit method where profit from a permanent establishment is subject to tax below a minimum rate• Subject to tax rule applies withholding tax to income at the source and adjusting eligibility for treaty benefits on certain income taxed below a minimum rate.The OECD will hold a consultation meeting on December 9 to give stakeholders an opportunity to discuss their comments with the Inclusive Framework countries.Pillar One, which addresses the allocation of taxing rights between jurisdictions and considers various proposals for new profit allocation, has already been through a consultation period, which elicited more than 300 letters from trade groups, multinationals and industry bodies around the world.