OECD releases 2500+ pages of public comments to its pillar one “unified approach” for taxing multinationals – By Julie Martin, MNE Tax

The OECDThe Organisation for Economic Co-operation and Development (OECD) is an international organisation comprising 38 member countries, established to foster economic growth, trade, and development on a global scale. Founded in 1961, the OECD provides a forum for governments to collaborate, share policy experiences, and develop solutions to common economic challenges. The OECD's core mission is to promote policies that improve... on November 15 published more than 300 comment letters that respond to its request for feedback on the Secretariat’s proposal for a “unified approach” to pillar one.

The OECDThe Organisation for Economic Co-operation and Development (OECD) is an international organisation comprising 38 member countries, established to foster economic growth, trade, and development on a global scale. Founded in 1961, the OECD provides a forum for governments to collaborate, share policy experiences, and develop solutions to common economic challenges. The OECD's core mission is to promote policies that improve... Secretariat’s proposal, released October 9, aims to expedite agreement among a coalition of 130+ nations that make up the “Inclusive Framework on BEPSBEPS stands for "Base Erosion and Profit Shifting". BEPS refers to tax avoidance strategies used by multinational enterprises (MNEs) to exploit gaps and mismatches in the international tax system. By shifting profits from high-tax jurisdictions to low- or no-tax locations, MNEs reduce their overall tax burden, even if little to no economic activity occurs in the low-tax jurisdictions. These practices erode...” on an update to the international tax rules. The plan would allocate a greater share of multinational group profits and related taxing rightsFiscal Sovereignty is the inherent authority of a state to independently manage its financial and economic policies, especially the power to levy and collect taxes within its jurisdiction. Central to national autonomy, fiscal sovereignty enables governments to shape economic policies that reflect their priorities, ranging from welfare programs to defence and infrastructure investment. It also underpins each country’s approach to... to countries where a multinational’s customers or users reside to yield fairer taxation of multinational digital and tech companies.

The written feedback on the OECDThe Organisation for Economic Co-operation and Development (OECD) is an international organisation comprising 38 member countries, established to foster economic growth, trade, and development on a global scale. Founded in 1961, the OECD provides a forum for governments to collaborate, share policy experiences, and develop solutions to common economic challenges. The OECD's core mission is to promote policies that improve... plan was submitted by large multinationals; trade associations; law, accounting, and advisory firms; academics; intergovernmental organizations; and civil society groups. More than 2,500 pages of comments were released.

The UN Committee of Experts on International Cooperation in Tax Matters was among the commentators. The UN committee said that the OECDThe Organisation for Economic Co-operation and Development (OECD) is an international organisation comprising 38 member countries, established to foster economic growth, trade, and development on a global scale. Founded in 1961, the OECD provides a forum for governments to collaborate, share policy experiences, and develop solutions to common economic challenges. The OECD's core mission is to promote policies that improve... Secretariat should make a greater effort to include developing countries in the international tax rewrite decision-making process and pay full attention to their interests.

The committee said that the OECDThe Organisation for Economic Co-operation and Development (OECD) is an international organisation comprising 38 member countries, established to foster economic growth, trade, and development on a global scale. Founded in 1961, the OECD provides a forum for governments to collaborate, share policy experiences, and develop solutions to common economic challenges. The OECD's core mission is to promote policies that improve... proposal is too complex and suggested that the proposal be remodeled into something simpler, perhaps using withholding taxes. Moreover, the plan’s exclusion of businesses that are not consumer-facing and the revenue threshold should be reconsidered. Further, the UN committee said that the unified approach’s “Amount B” should be determined “fairly and carefully” to not harm developing nations’ interests.

Several industry trade groups advocated for pillar-one carve outs for their members. In this category were trade associations representing the insurance industry, such as the Insurance Company Working Group on BEPSBEPS stands for "Base Erosion and Profit Shifting". BEPS refers to tax avoidance strategies used by multinational enterprises (MNEs) to exploit gaps and mismatches in the international tax system. By shifting profits from high-tax jurisdictions to low- or no-tax locations, MNEs reduce their overall tax burden, even if little to no economic activity occurs in the low-tax jurisdictions. These practices erode...; the financial services industry, such as the Association for Financial Markets in Europe; and natural resources industries, such as the Mining Institute of Canada.

The World Customs Organization asked the OECDThe Organisation for Economic Co-operation and Development (OECD) is an international organisation comprising 38 member countries, established to foster economic growth, trade, and development on a global scale. Founded in 1961, the OECD provides a forum for governments to collaborate, share policy experiences, and develop solutions to common economic challenges. The OECD's core mission is to promote policies that improve... to take into account the effect of the proposal on customs valuation.

In its written submission, BIAC said that its membership was unable to reach a consensus on the scope and appropriateness of the “consumer-facing” exception. The group said also that simplification measures should be considered, such as having the multinational pay Amount A to its parent jurisdiction for onward transmission to other countries. The group also suggested that the new rules provide for the sole use of the parent jurisdiction’s accounting standards rather than the use of accounting standards for all countries entitled to Amount A.

BIAC further said that overlaps between Amounts A, B, and C must be addressed to avoid double taxationDouble Taxation occurs when the same income or financial transaction is taxed twice, typically in different jurisdictions. It can arise in two primary contexts: economic double taxation, where the same income is taxed twice in the hands of different taxpayers, and juridical double taxation, where the same taxpayer is taxed on the same income in more than one country. Double... of the same profit. Further, countries must adopt dispute resolution procedures similar to mandatory binding arbitration as a part of the plan, the business group said. Substantive changes to the mutual agreement procedure in tax treaties are a “crucial” component of any agreement, BIAC said.

In its comments, Amazon expressed support for the unified approach and laid out seven principles that it believed should guide the international tax reform solution. Among these was a request that the rules be applied fairly to loss-making businesses and that the new enhanced nexus rules not be extended to indirect taxes.

The OECDThe Organisation for Economic Co-operation and Development (OECD) is an international organisation comprising 38 member countries, established to foster economic growth, trade, and development on a global scale. Founded in 1961, the OECD provides a forum for governments to collaborate, share policy experiences, and develop solutions to common economic challenges. The OECD's core mission is to promote policies that improve... will hear from a selection of these commentators at a public hearing, slated for November 21–22 in Paris. The event will also be broadcast live.

According to the hearing agenda, the first day of the consultation will be devoted to introductory remarks and discussion of the scope of the proposal, the new nexus rules, calculation of group profits for Amount A, and elimination of double taxationDouble Taxation occurs when the same income or financial transaction is taxed twice, typically in different jurisdictions. It can arise in two primary contexts: economic double taxation, where the same income is taxed twice in the hands of different taxpayers, and juridical double taxation, where the same taxpayer is taxed on the same income in more than one country. Double....

The second day will cover Amount B (fixed remuneration), and Amount C, on prevention and resolution of cross-border tax disputesTax Disputes arise when there is a disagreement between taxpayers and tax authorities regarding the interpretation or application of tax laws. These disputes may concern various issues such as the accuracy of a tax return, the eligibility for tax deductions or credits, the correct amount of tax liability, or transfer pricing adjustments. Tax disputes can lead to lengthy legal proceedings....

The comments to the secretariat’s proposal can be downloaded at this link  (Zip file, 169mb).