The public consultation meeting on the progress report on Amount A of Pillar One held on 12 September focused on the marketing and distribution safe harbour (MDSH) and the elimination of double taxation.
The OECD recognised the importance of eliminating unilateral measures and conceded that more work needs to be done to meet the intended deadline of mid-2023 for signing the Multilateral Convention. It advised that the Inclusive Framework will soon release updated rules on tax certainty and on the administration and removal of unilateral measures which will then be put forward for public consultation.
Other matters rising from the consultation were that the MDSH policy is misaligned with the operational execution of the formula and the issue of factoring of withholding taxes. Business stakeholders supported withholding taxes in the calculations and for a ‘domestic (or autonomous) business exemption’, but this was opposed by the South Centre and the Trade Union Advisory Committee (TUAC) fearing that this would lead to the uncoordinated implementation of unilateral measures.
The OECD conceded that proposed rules for eliminating double taxation were highly complex but this was inevitably the result of political compromise. Some stakeholders proposed that an exemption instead of a credit mechanism be granted explicitly in the MLC to avoid double taxation.
A PwC client briefing noted: ‘The consultation process demonstrated that business still has many serious concerns, including complexity and the arbitrary nature of several of the formulas, but it does seem that the OECD is taking stakeholder comments seriously. The OECD has a continuing urgency to move the project forward to its estimated completion date in mid-2023, but time will tell how realistic that is. Taxpayers should continue to model the provisions and engage with government and business organisations to achieve more simplicity and manageability in the final set of rules.’
The public consultation meeting on the progress report on Amount A of Pillar One held on 12 September focused on the marketing and distribution safe harbour (MDSH) and the elimination of double taxation.
The OECD recognised the importance of eliminating unilateral measures and conceded that more work needs to be done to meet the intended deadline of mid-2023 for signing the Multilateral Convention. It advised that the Inclusive Framework will soon release updated rules on tax certainty and on the administration and removal of unilateral measures which will then be put forward for public consultation.
Other matters rising from the consultation were that the MDSH policy is misaligned with the operational execution of the formula and the issue of factoring of withholding taxes. Business stakeholders supported withholding taxes in the calculations and for a ‘domestic (or autonomous) business exemption’, but this was opposed by the South Centre and the Trade Union Advisory Committee (TUAC) fearing that this would lead to the uncoordinated implementation of unilateral measures.
The OECD conceded that proposed rules for eliminating double taxation were highly complex but this was inevitably the result of political compromise. Some stakeholders proposed that an exemption instead of a credit mechanism be granted explicitly in the MLC to avoid double taxation.
A PwC client briefing noted: ‘The consultation process demonstrated that business still has many serious concerns, including complexity and the arbitrary nature of several of the formulas, but it does seem that the OECD is taking stakeholder comments seriously. The OECD has a continuing urgency to move the project forward to its estimated completion date in mid-2023, but time will tell how realistic that is. Taxpayers should continue to model the provisions and engage with government and business organisations to achieve more simplicity and manageability in the final set of rules.’
