The CIOT has recently responded to the UK consultation on proposed implementation of the model rules into UK law and has also commented on the OECD’s implementation framework consultation.
Key points from the CIOT’s response to the Treasury consultation on UK implementation include:
– The model rules will present a huge administrative and compliance challenge for many tax authorities as well as for taxpayers. 12 months is not long enough to successfully implement these incomplete and very detailed laws.
– Consultation on implementation of the Rules into UK law has been unsatisfactory because the framework of rules under scrutiny is itself still not complete.
– Developing domestic legislation alongside the ongoing development of the underlying international framework will not lead to good law and will present challenges for businesses and advisers, leading to arbitrary results.
– The UK government should confirm to businesses as soon as possible that it will delay implementation until at least 2024.
– The government should encourage all jurisdictions to reach agreement on a multilateral set of interlocking rules where each country’s implementation is recognised from the outset as a qualifying regime.
– The UK should not introduce complex new rules ahead of other countries, thereby putting UK-parented multinationals at a competitive disadvantage.
The CIOT has also commented on the OECD’s Implementation framework for the GloBE Rules, under pillar 2, which are designed to facilitate the co-ordinated and consistent implementation and administration of the rules:
– Although the overarching aim is for a consistent approach to implementation of the Rules across jurisdictions, countries should retain the flexibility to be able to adapt the Rules to ensure the policy objectives of pillar 2 can be met. This would help address concerns raised so far (for example, see the BIAC letter outlining problems with complexity and inconsistency within the Rules).
– Defects in the Rules should be acknowledged and addressed by the Inclusive Framework. Where there is no ‘international appetite to change the GloBE Rules’, they must, as a minimum, be ‘supplemented by the Commentary and the GloBE Implementation Framework to make them operable in practice’.
– A mechanism for peer review of local implementation would help reconcile domestic law with adoption of the GloBE Rules, with jurisdictions considered as ‘qualifying’ based on the practical results of implementation rather than whether or not they have implemented ‘every single word’ of the Rules into domestic law. A similar ‘pass list’ principle could also be adopted, based on peer review, to show that countries have introduced minimum tax rules which are aligned with pillar 2 to minimise compliance costs and work for businesses.
– The CIOT report also discusses interactions between the two Pillars, the US global intangible low-taxed income tax (GILTI) and base erosion and anti-abuse tax (BEAT), and the need for a ‘clear, strong and effective multilateral arbitration process agreed by tax administrations which is binding on them’ in relation to pillar 2.
The CIOT has recently responded to the UK consultation on proposed implementation of the model rules into UK law and has also commented on the OECD’s implementation framework consultation.
Key points from the CIOT’s response to the Treasury consultation on UK implementation include:
– The model rules will present a huge administrative and compliance challenge for many tax authorities as well as for taxpayers. 12 months is not long enough to successfully implement these incomplete and very detailed laws.
– Consultation on implementation of the Rules into UK law has been unsatisfactory because the framework of rules under scrutiny is itself still not complete.
– Developing domestic legislation alongside the ongoing development of the underlying international framework will not lead to good law and will present challenges for businesses and advisers, leading to arbitrary results.
– The UK government should confirm to businesses as soon as possible that it will delay implementation until at least 2024.
– The government should encourage all jurisdictions to reach agreement on a multilateral set of interlocking rules where each country’s implementation is recognised from the outset as a qualifying regime.
– The UK should not introduce complex new rules ahead of other countries, thereby putting UK-parented multinationals at a competitive disadvantage.
The CIOT has also commented on the OECD’s Implementation framework for the GloBE Rules, under pillar 2, which are designed to facilitate the co-ordinated and consistent implementation and administration of the rules:
– Although the overarching aim is for a consistent approach to implementation of the Rules across jurisdictions, countries should retain the flexibility to be able to adapt the Rules to ensure the policy objectives of pillar 2 can be met. This would help address concerns raised so far (for example, see the BIAC letter outlining problems with complexity and inconsistency within the Rules).
– Defects in the Rules should be acknowledged and addressed by the Inclusive Framework. Where there is no ‘international appetite to change the GloBE Rules’, they must, as a minimum, be ‘supplemented by the Commentary and the GloBE Implementation Framework to make them operable in practice’.
– A mechanism for peer review of local implementation would help reconcile domestic law with adoption of the GloBE Rules, with jurisdictions considered as ‘qualifying’ based on the practical results of implementation rather than whether or not they have implemented ‘every single word’ of the Rules into domestic law. A similar ‘pass list’ principle could also be adopted, based on peer review, to show that countries have introduced minimum tax rules which are aligned with pillar 2 to minimise compliance costs and work for businesses.
– The CIOT report also discusses interactions between the two Pillars, the US global intangible low-taxed income tax (GILTI) and base erosion and anti-abuse tax (BEAT), and the need for a ‘clear, strong and effective multilateral arbitration process agreed by tax administrations which is binding on them’ in relation to pillar 2.
