The OECD has published the comments received on its proposal for a ‘unified approach’ under pillar one of its international solution for taxation of multinational enterprises in the digital economy. The draft agenda for the public consultation meeting in Paris on 21-22 November is now available.
Some commentators have expressed disappointment that the ‘unified approach’ could not find room for a proposal from the G24 group of countries, based around ‘significant economic presence’.
The Independent Commission for the Reform of International Corporate Taxation (ICRICT) described the unified approach as ‘not good enough’ and urged the OECD secretariat to reconsider the G24 proposal. The ICRICT submission makes the following points:
the proposal leaves the transfer pricing system largely in place, while adding complexity with a three-stage bolt-on solution for a small percentage of global profits;
it is not possible to distinguish ‘routine’ (locally generated) and ‘residual’ (internationally generated) global profits of multinationals, as all profits are essentially the result of the global activities of the firm;
allocating taxing rights based only on sales would tend to advantage advanced economies who consume more, while developing countries would benefit significantly from the inclusion of employment in any allocation formula;
the scope of the reform focused only on ‘large consumer-facing businesses’ is too limited and likely to be further watered down by carve-outs for specific industries or business models;
the G24 proposal would allocate all profits using a balanced formula (including employment in particular, as well as digital users and the use of natural resources) and should be brought back into the negotiations;
the OECD secretariat should publish the economic impact analysis of the proposal, along with the full data from multinationals’ country-by-country reporting, to enable the 134 members of the inclusive framework to fully evaluate its implications; and
developing countries should not have to accept stricter and opaque dispute resolution mechanisms as a condition for redistribution of taxing rights.
The ICRICT’s position is that governments should move towards a unitary approach to taxation of multinationals, based on a system of multi-factor global formulary apportionment, together with a global minimum tax.
The OECD has published the comments received on its proposal for a ‘unified approach’ under pillar one of its international solution for taxation of multinational enterprises in the digital economy. The draft agenda for the public consultation meeting in Paris on 21-22 November is now available.
Some commentators have expressed disappointment that the ‘unified approach’ could not find room for a proposal from the G24 group of countries, based around ‘significant economic presence’.
The Independent Commission for the Reform of International Corporate Taxation (ICRICT) described the unified approach as ‘not good enough’ and urged the OECD secretariat to reconsider the G24 proposal. The ICRICT submission makes the following points:
the proposal leaves the transfer pricing system largely in place, while adding complexity with a three-stage bolt-on solution for a small percentage of global profits;
it is not possible to distinguish ‘routine’ (locally generated) and ‘residual’ (internationally generated) global profits of multinationals, as all profits are essentially the result of the global activities of the firm;
allocating taxing rights based only on sales would tend to advantage advanced economies who consume more, while developing countries would benefit significantly from the inclusion of employment in any allocation formula;
the scope of the reform focused only on ‘large consumer-facing businesses’ is too limited and likely to be further watered down by carve-outs for specific industries or business models;
the G24 proposal would allocate all profits using a balanced formula (including employment in particular, as well as digital users and the use of natural resources) and should be brought back into the negotiations;
the OECD secretariat should publish the economic impact analysis of the proposal, along with the full data from multinationals’ country-by-country reporting, to enable the 134 members of the inclusive framework to fully evaluate its implications; and
developing countries should not have to accept stricter and opaque dispute resolution mechanisms as a condition for redistribution of taxing rights.
The ICRICT’s position is that governments should move towards a unitary approach to taxation of multinationals, based on a system of multi-factor global formulary apportionment, together with a global minimum tax.
