Initial insights from the Pillar Two public consultation.
On 9 December 2019, a public consultation on the OECD Secretariat’s Pillar Two ‘Global Anti-Base Erosion’ (GloBE) proposal was held in Paris. The public consultation focused on key questions identified in the consultation document published on 8 November 2019. Pillar Two centres on specific technical issues in respect of the GloBE proposal, which itself focuses on what the OECD regards as ‘the remaining BEPS issues’ by providing jurisdictions with a right to ‘tax back’ where other jurisdictions have not exercised their primary taxing rights over profits, or where a payment is otherwise subject to low levels of effective taxation. It essentially looks at introducing a globally-agreed minimum standard on direct tax matters that will ensure that all internationally operating businesses pay a minimum level of tax. The OECD has received a multitude of comments on Pillar Two.
The Pillar Two consultation document provides little clarity on where the OECD has landed on the GloBE design features, and the document leaves many questions unanswered at this stage. There are complex issues to consider with the wide-ranging nature of the proposals, as well as complexities concerning choosing between the various blending rules, and considering potential carve-outs to the new rules. The following considerations will be taken into account by the OECD going forwards:
With 2020 on our doorstep, we can look back on a year where the taxation of the digitalised economy was a particularly hot topic. We expect that this topic will yet again be high on the agenda of tax policy makers, business and practitioners alike in the coming year. We await developments as the OECD continues to work to deliver on its tight deadlines.
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