The OECD Tax Talk held on 21 February 2022 provided an updated on important elements of tax work at the OECD.
Two-Pillar International Tax Package
Public consultations have begun and will cover the various building blocks of Pillar One on a rolling basis. The public consultation period on the nexus rules and revenue sourcing finished on 18 February 2022. The Task Force on the Digital Economy (TFDE) is to work on finalising model rules taking into account the input from the consultation. Negotiations have begun for a multilateral convention (MLC) for the implementation of the rules.
A public consultation on tax base determination has been launched and a consultation document was issued on 18 February 2022. The deadline for comments is 4 March 2022. The TFDE intends to finalise the model rules based on input received during the consultation and negotiations for an MLC will begin in early March.
The TFDE is continuing with technical work in relation to the other building blocks of Pillar One, and the relevant documents will be released when complete on a rolling basis. After each building block has been the subject of a public consultation, negotiations will begin for a multilateral convention.
Amount B of Pillar One
Under Pillar One, Amount B would be the fixed return for baseline marketing and distribution operations. The application of the arm’s length principle to the in-country baseline marketing and distribution activities is to be streamlined, bearing in mind the requirements of countries that have limited administrative capacity. By simplifying the rules, the OECD aims to reduce the frequency of disputes about the pricing of marketing and distribution arrangements.
The technical work under way at the moment is looking at the definition of the baseline marketing and distribution activities and on how to price them. A public consultation on the relevant issues is to be launched by mid-2022 with a view to completing the work on these issues by the end of 2022.
Pillar Two
A public consultation is to be held on the Pillar Two rules in late February or March 2022). The consultation will cover aspects of the GloBE Implementation Framework on which input will be important, including the filing obligations and implications for multinational groups and the work on safe harbours. The GloBE Implementation Framework in relation to administrative, compliance and coordination issues will be finalised before the end of 2022.
Subject-to-tax rule
A provision in relation to the subject-to-tax rule (STTR) is to be introduced into double tax treaties. A commentary will be produced with guidance on how to interpret and apply the STTR. A multilateral instrument will be drawn up to modify tax treaties where required, ensuring the efficient implementation of the rule into tax treaties. There will also be technical support for jurisdictions in implementing the STTR.
A public discussion draft on the model treaty provision and commentary will be issued in March 2022. There will also be a public discussion draft on the development of the STTR multilateral instrument.
Tax and Development
The combined OECD and UNDP program Tax Inspectors Without Borders (TIWB) is currently carrying out around 100 programmes. The TIWB programmes and linked audit support programmes by the OECD, World Bank and African Tax Administration Forum (ATAF) have collected more than USD 1.4 billion in additional tax revenues.
The Tax and Development Days held by the OECD on 16 and 17 February 2022 attracted over 3,500 participants. A new area of focus for developing countries is tax Incentives, taking into account the effects the new global minimum tax will have on existing incentives.
Carbon pricing
Each country can decide on its own policies to reach its climate targets. However, there is a risk of a lack of communication and coordination leading to negative spillovers, including trade distortions, carbon leakage and trade tensions. The OECD has therefore proposed an inclusive initiative on climate mitigation measures. This would provide a multilateral vehicle to share data and information, and to facilitate mutually beneficial exchanges to optimise emissions reduction on a global basis.
