On 16 November 2022 the OECD published the comments received on the Progress Report on the Administration and Tax Certainty Aspects of Amount A of Pillar One. Comments were received from more than 30 organisations and individuals in business, industry and the professions.

The comments reveal that there are some concerns around the compliance burden on businesses and on the ability of tax administrations to commit appropriate resources to administering the new provisions. There are also concerns about the tight timetable for agreement of Pillar One and the need for issues to be considered thoroughly.

Concerns are expressed on various aspects including provisions for relief of double taxation. For example, the Chartered Institute of Taxation (CIOT) notes that further work is needed to ensure that Pillar One can adequately address the issue of double taxation. It is not yet clear how each jurisdiction will provide double taxation relief because there are complexities in the arrangements in each country for a foreign tax credit or exemption regimes. CIOT notes that strong mechanisms are needed to avoid double taxation and to provide certainty to tax administrations and multinationals.

Business at OECD (BIAC) noted that the administrative aspects of Pillar One are to be incorporated into existing tax administration frameworks where possible. Although this can keep additional compliance costs to a minimum, BIAC points out that Amount A is a reallocation of tax to market countries using a new nexus that is separate from existing transfer pricing systems; and considers that a new administrative system is required to operate the new approach. The mechanisms for computing and administering Amount A should be included in the multilateral convention the MLC, to bring greater clarity to the issues, and facilitate administration of Amount A.

Developing Countries

The South Centre, which has previously calculated that developing countries will benefit less than developed countries from the operation of Amount A, has put forward other points relevant to developing countries.

Under the Amount A rules relevant information is to be shared through an exchange of information framework meeting data security and confidentiality requirements. The South Centre argues that it is important that countries should actually receive the relevant data and use it to assist tax collection. Meeting data safety requirements could result in high compliance costs that prevent developing countries from accessing the information. This would be similar to the situation in relation to country-by-country reporting where only a few developing countries have been able to access reports from abroad. The Exchange of Information framework should therefore keep confidentiality standards to the minimum necessary, to facilitate access to the information by developing countries.

The Amount A rules propose that members of the Determination Panels to resolve disagreements should be randomly selected. The South Centre notes however that the selection will only be from the pool of jurisdictions that express interest, and these are more likely to be developed countries, so the composition of the Panels could be statistically skewed in favour of members from developed countries. The Centre recommends that some seats on the Panels should be reserved for developing countries, to promote inclusiveness.

As it is likely that the Panels will have a majority of developed countries represented, a simple majority voting method may be disadvantageous to developing countries. The South Centre therefore recommends that, if possible, decision-making should require a special or two-thirds majority.