The OECD kicked off two days of discussions on Thursday 14 January on the results of the public consultation on blueprints for the two pillars of international tax reform (see EUROPE 12579/21). The main message from stakeholders is clear: the proposals need to be simplified.
Overall, the 200 contributions received show strong support for an international solution based on consensus to avoid the proliferation of unilateral measures, explained Martin Kreienbaum, Chair of the G20/OECD Inclusive Framework on BEPS. But many also called for a reduction in the complexity and cost of compliance, he added.
The detailed plans reflect the progress of the negotiations, said Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy and Administration. When there is no agreement, many countries stand firm on their position, which adds several “layers” and necessarily creates complexity, he said. However, he assured that the OECD had already begun to address this issue.
For Pierre Habbard, Secretary General of the Trade Union Advisory Committee to the OECD (TUAC), the main problem is not only a lack of understanding, but also a lack of policy coherence. In particular, he regretted that the discussions remain blocked in the hands of tax experts when they have implications in many other areas, such as employment, the environment and business investment.
Mr Habbard also called on the OECD to decouple the negotiations between Pillar I (digital taxation) and Pillar II (minimum business taxation) of the reform and especially not to create conditionality between the two, as some would like.
Tax Director Simon Graddon of e-commerce giant Amazon also called for simplification, while stressing that his company is a “strong supporter” of the OECD’s work. To avoid double taxation, “the solution must be clear and workable”, he said.
The same goes for Lisa Waldin of Netflix, who also feels that the streaming of digital content should not be considered an automated digital service, as it is more akin to selling goods and services online.
Diverging views on the scope of application
For the rest, the responses to the public consultation show a divergence of views regarding the scope of Pillar I.
Some commentators have argued for a broader scope of application. In particular, many digital companies argued in favour of a quantitative approach to the scope, based on revenues and profitability, while others argued for a scope based on online sales, where revenues are recorded outside the market.
For their part, NGOs generally felt that most companies should be included in the scope in order to reduce the complexity of the rules and ensure a level playing field.
Some contributors also supported a limited scope for automated digital services. Others were in favour of a gradual application of risks, starting with large companies, for example.
A small number of commentators have also reportedly supported the US proposal for a voluntary ‘Safe Harbor’ scheme.
The OECD Secretariat hopes that the contributions received will help to overcome the remaining open issues. Negotiations are currently “waiting” for signals from the new US administration, said Pascal Saint-Amans.
The new US Treasury Secretary is expected to be in place at the G20 Finance meeting at the end of February and should thus be able to bring more clarity to the US position. The OECD hopes that an agreement can be reached at the G20 meeting in Venice in early July. (Original version in French by Marion Fontana)