As countries worldwide implement the OECD’s 15% global minimum tax on multinational enterprises, small and medium-sized businesses are discovering they’re not immune to the ripple effects. The reforms, which began taking effect in 2024 with approximately 90% of in-scope multinationals now subject to the new rate, have triggered a broader recalibration of corporate tax policies that extends far beyond large corporations.
The OECD’s Pillar Two framework targets multinationals with revenues exceeding €750 million annually, but the implementation has created a complex environment for smaller firms operating in the same jurisdictions. According to the OECD’s Tax Policy Reforms 2025 report, which surveyed 86 jurisdictions, governments took divergent approaches to SME taxation throughout 2024. Portugal reduced its corporate income tax rate for SMEs on the first €50,000 of taxable income from 17% to 16%, while Spain and the Slovak Republic introduced similar reductions through tiered structures. Conversely, Armenia doubled its SME tax rate from 5% to 10%, and Japan increased rates for SMEs with annual taxable income exceeding ¥1 billion to 17%.
These shifts reflect governments’ attempts to balance revenue needs with competitive pressures. High debt levels coupled with spending demands related to climate change and aging populations have pushed jurisdictions to mobilize more revenue, even as they recognize SMEs’ role in economic growth. The reforms have created an uneven playing field where businesses must assess not just their own tax obligations but also how changes affecting larger competitors might reshape market dynamics.
The compliance burden poses another significant challenge. A 2024 survey by the Tax Foundation found that all responding companies reported increased income tax complexity since 2017, with a weighted average increase in compliance costs of 32% from 2017 to 2023. While the survey focused on larger firms, evidence points to economies of scale in tax compliance, meaning smaller companies face disproportionately higher burdens relative to their resources. SMEs typically lack dedicated tax departments and must either divert management attention from core operations or pay external advisors to address increasingly complicated international rules.
The indirect effects may prove more consequential than direct tax changes. Companies with cross-border operations are reassessing their corporate structures and transfer pricing arrangements to comply with the new minimum tax calculations, which operate on a country-by-country basis. These adjustments influence supply chain decisions, investment locations, and competitive positioning in ways that affect businesses of all sizes.
The World Bank’s research indicates that in most low and middle-income countries, consumable income for poor households often remains less than market income after taxes and transfers, highlighting the delicate balance governments must strike when raising revenue through tax reform.
Looking ahead, the tax environment will likely remain fluid. As jurisdictions continue implementing domestic minimum taxes and backstop rules through 2025, SMEs must develop adaptive strategies for monitoring regulatory changes across the markets they serve. The shift toward country-by-country tax assessment and increased transparency requirements signals a fundamental change in how international business taxation operates, with implications extending well beyond the largest multinationals originally targeted by these reforms.
