• International Tax Reform: next step – G20 meeting

    B.M.R. On

    Just published: the OECD Secretary-General’s Tax Report to G20 Finance Ministers and Central Bank Governors.

    The Report has been published in advance of the G20 meeting scheduled for 9 and 10 July in Venice.

    Among other things, it gives an update of the work of the Inclusive Framework, i.e the Two Pillars proposals. From the Report, we learn that one more IF member (Peru) has signed up to the agreement published on 1 July. The Secretary-General is ‘confident’ that the other eight members (who did not sign up) will also come on board. (I’m far less optimistic on this point.)

    So far, no solid reasons given for the hold-out from Nigeria and Kenya. We’ll find out soon enough.

  • Pillar One – a prediction

    B.M.R. On

    The G20 Riyadh Summit concluded today. On international taxation, there was (as expected) broad support for the work of the OECD Inclusive Framework.

    The G20 Leaders expect that the work will be concluded (as earlier promised by the OECD) in mid-2021.

    Well, I don’t think this will be achieved. The outstanding technical issues are a big obstacle, moreso as any agreement would require the unanimous approval of the members of the Inclusive Framework.

    As far as digital taxes are concerned, here is my prediction: over the next few months, there will be an increase in unilateral measures to tax digital businesses. Countries that have held back up till now will begin to introduce these new taxes. While many countries had held back, waiting instead for a ‘global solution’ from the OECD Inclusive Framework, there is an understandable impatience in the air. Countries don’t want to miss out on tax revenues, and the recent delay (by the Inclusive Framework) is already prompting some countries to introduce their own measures. In this, they would be joining those other countries that had earlier on decided not to sit back and wait for a global solution, but rather to introduce their own rules in the meantime.

    And this will, of course, lead to double, and even multiple, taxation across jurisdictions. Eventually, countries will negotiate bilateral agreements to reduce or eliminate this double taxation.

    This is most likely how the digital taxes issue will be resolved. We will also likely see common features emerge in the various unilateral digital taxes being introduced, making it easier for there to be standard treaty provisions for double tax relief.

    This ‘organic’ approach will render Pillar 1 redundant. The combination of unilateral (taxing) measures and treaty provisions (for double tax relief) will see to that.

    I think this is the way that things will go. I would be very surprised if Pillar 1 ever saw the light of day as a concrete plan.

    And as for my prediction for Pillar 2, I’ll leave that for another blog post.

  • Inclusive Framework Blueprints – the main points

    B.M.R. On

    Last week, the OECD published the blueprints for both Pillar 1 and Pillar 2. Of course, as curious as we all are, not everyone is keen on wading through hundreds of pages.

    And who can blame them? Anyway, here’s some good news. The good folks at TaxSutra have performed an almighty public service. For Pillar One, at least. They’ve put together a useful highlights document, setting out the main takeaways. You can access it here.

    I haven’t seen something similar for Pillar Two. Must be there somewhere. If not, I might have to create it myself.

  • OECD Tax Talks – what next?

    B.M.R. On

    Yesterday, the OECD gave us an update on the work of the Inclusive Framework on Pillars I and II. No agreement on the final package, but here’s what we got, anyway …

    We got the official reports on the Pillar I and Pillar II Blueprints (see here and here). Much of the content had been heavily leaked beforehand, but there you go.

    We also received the impact assessment. This time around, it includes full details of the methodology used. The previous one had been criticized for not including such details.

    And we also get a chance to comment on the Blueprints – public consultation opened yesterday, and runs till 14 December 2020. Here is the condoc.

    So no agreement; didn’t stop the OECD trying to put a positive spin on things, though – lack of agreement not withstanding, the Blueprint provides a ‘solid foundation for a future agreement’. I suppose we can take that.

    The Inclusive Framework now has a few more months to secure that elusive agreement. The new target is mid-2021.

    I’m still not banking on an agreement being achieved. Rather I foresee a proliferation in unilateral measures across countries. Expect more digital services taxes. This could then lead to a harmonization effort across the board, and perhaps also a treaty solution for allocating taxing rights, and relieving double taxation. A role perhaps for the recently proposed Article 12B of the UN Model? Interesting if things actually turn out that way.

  • Inclusive Framework documents leaked – again

    B.M.R. On

    Another fortnight, another leak. This evening, the latest sets of leaked Inclusive Framework blueprints are once again merrily making their way across the internet.

    These versions are dated 2 October. They’ll definitely contain a lot of what we will hear during next week’s Tax Talks session.

    I’ve had a quick look at both documents, but I’m not going to delve any deeper into them. Given how close we are to the Tax Talks session, it’s wiser to wait for the official report. No point ploughing through almost 500 pages of text that may or may not be changed by the time the Tax Talks session comes round.

    That said, I’m sure some of you would prefer to get the juicy details upfront. Fair enough, I say. So, for the curious (and impatient) among you, here are the leaked Pillar One and Pillar Two documents.