Work is in full swing at the OECD to produce, by the 8-9 October Inclusive Framework on BEPS meeting, the blueprints on the design of the two pillars of international tax reform.
The draft texts, which were leaked a few weeks ago and circulated among law firms and large multinationals, were posted online on Thursday, September 3, by Allison Christians, a professor at McGill University in Montreal.
The texts in question, which were forwarded to the delegates of the Inclusive Framework for a first round of comments, describe the main features of the constituent elements of the two pillars and identify areas where a political decision is still needed. The final versions of the detailed plans are expected to be reviewed by G20 Finance Ministers on October 15-16 and by G20 Leaders on 21-22 November.
The document on digital taxation (Pillar One) sets out the basic elements of the architecture for a unified approach, which was approved in January (see EUROPE 12416/20). But it also seems to have taken into account the criticisms made about the complexity of the proposals (see EUROPE 12437/13), since it states that “a number of simplification features have been developed”, notably in terms of segmentation and benefit sharing.
Furthermore, the draft text recognises that some issues, both technical and political, are still outstanding. For some elements, like revenue thresholds, members of the Inclusive Framework will take a final decision only as part of an overall political agreement.
Among the open political issues is always the question of scope. “Some members have advocated for a phased implementation with ADS (Automated Digital Services) coming first and CFB (Consumer Facing Business) following later, whereas other members are opposed to such an implementation” recalls the document.
The text also refers to the request of the United States to establish a “Safe Harbour” which would enable a multinational enterprise (MNE) group to elect on a global basis whether to be subject to Pillar One. “This issue remains to be solved as it was agreed in the Outline to look at this issue once the design of the new taxing right is completed”, clarifies the text.
German Finance Minister Olaf Scholz recently expressed confidence that progress on both pillars can be made in the autumn (see EUROPE 12545/19).
For his part, on Friday 4 September, on BFMTV/RMC, his French counterpart, Bruno Le Maire, warned that if the OECD fails this year on digital taxation, there would be “a European solution in the course of 2021”.
See draft texts on Pillar I: https://bit.ly/353OzAw and Pillar II: https://bit.ly/2Ds70U3 (Original version in French by Marion Fontana)