Do the proposals represent a new inclusive global grand bargain that will finally stem the tide of unilateral actions in our uncertain world? This is the main question of the 14-pages document which has been prepared by the experts of WTS Global as a comment on Pillar Two of the OECD Secretariat’s proposal for a new tax order.
The Secretariat’s Global Anti-Base Erosion Proposal (“GloBE”) under Pillar Two was published on 8 November 2019 and interested parties were invited to send their comments until 2 December 2019. Just like on the Proposal for “Unified Approach” under Pillar One, WTS Global provided extensive comments on this proposal, too.
What is Pillar Two?
The tax challenges of the digitalisation of the economy were identified as one of the main areas of focus of the Base Erosion and Profit Shifting (BEPS) Action Plan, leading to the 2015 BEPS Action 1 Report. Policy discussion on those challenges remain an important part of the international agenda.
The OECD/G20 Inclusive Framework on BEPS provides for two pillars to be developed with a consensus solution to be agreed upon by the end of 2020.
Pillar Two takes a massive step forward beyond addressing digital taxation and proposes a global minimum effective tax regime comprising of four component – income inclusion rule, undertaxed payments rule, switch-over rule and subject to tax rule. These co-ordinated set of rules are intended to address “ongoing risks from structures that allow MNEs to shift profit to jurisdictions where they are subject to no or very low taxation”.
Like the Four Horsemen of the Apocalypse, however, do these proposals spell the death knell of the post-war international income tax framework as we have come to know it – where bilateral treaties allocate taxing rights to avoid double taxation and countries abide by a set of commonly acceptance of OECD soft-law principles? Or do they represent a new inclusive global grand bargain that will finally stem the tide of unilateral actions in our uncertain world?
WTS Global commented on the proposal with insights and analysis from WTS experts.