The UN Secretary-General has published his final report on inclusive and effective international tax co-operation. The report provides a critique of the OECD two-Pillar reforms, pointing out that the OECD is dominated by the most wealthy developed countries and that, although the technical quality of the OECD’s work is high, it is adopted far more widely by developed rather than developing countries. The report notes a ‘perception among developing countries that the expected benefit from the proposed reforms will be minimal, especially when compared to the cost of implementation’.
The report suggests that, under Pillar One, Amount A will allocate too little to market jurisdictions from a handful of MNEs, with developing countries also being required to give up the right to impose their own digital services taxes on all enterprises – a potentially significant source of revenue. On Pillar Two minimum taxation, the report says that many developing countries are unlikely to participate, given the often more pressing need to deploy resources elsewhere.
The report identifies three key options for consideration by UN member states:
1. A multilateral convention on tax: a legally binding agreement setting out clear rights and obligations, including for the reporting and exchange of tax information, and providing mechanisms for monitoring compliance and for dispute resolution.
2. A framework convention on international tax cooperation: an agreement setting out the principles or ‘core tenets’ for international tax cooperation. A framework approach provides greater flexibility, says the report, to address problems incrementally ‘by agreeing to begin discussions although there is no strong political consensus in favour of specific solutions’.
3. A framework for international tax cooperation: a non-binding multilateral agenda for coordinated actions on tax. The essence of this option seems to be for member states to agree where it makes sense to take action at an international level and where it would be better to act locally.
The report sets out a useful summary of the key features of each option (see page 15 of the report).
Next steps will be for UN members to decide which (if any) option to pursue, followed by a potentially lengthy period setting out what would be required. In the meantime, it seems likely that elements of the OECD Pillars will start coming into force (particularly, the Pillar 2 minimum top-up taxes).
The Financial Times (29 August) quotes Bill Morris, global tax policy leader at PwC, as saying that the ‘possibility of a larger role in international tax for the UN must be taken seriously’, with Morris warning that businesses would be concerned at a potential ‘fracturing’ of global tax affairs.
The UN Secretary-General has published his final report on inclusive and effective international tax co-operation. The report provides a critique of the OECD two-Pillar reforms, pointing out that the OECD is dominated by the most wealthy developed countries and that, although the technical quality of the OECD’s work is high, it is adopted far more widely by developed rather than developing countries. The report notes a ‘perception among developing countries that the expected benefit from the proposed reforms will be minimal, especially when compared to the cost of implementation’.
The report suggests that, under Pillar One, Amount A will allocate too little to market jurisdictions from a handful of MNEs, with developing countries also being required to give up the right to impose their own digital services taxes on all enterprises – a potentially significant source of revenue. On Pillar Two minimum taxation, the report says that many developing countries are unlikely to participate, given the often more pressing need to deploy resources elsewhere.
The report identifies three key options for consideration by UN member states:
1. A multilateral convention on tax: a legally binding agreement setting out clear rights and obligations, including for the reporting and exchange of tax information, and providing mechanisms for monitoring compliance and for dispute resolution.
2. A framework convention on international tax cooperation: an agreement setting out the principles or ‘core tenets’ for international tax cooperation. A framework approach provides greater flexibility, says the report, to address problems incrementally ‘by agreeing to begin discussions although there is no strong political consensus in favour of specific solutions’.
3. A framework for international tax cooperation: a non-binding multilateral agenda for coordinated actions on tax. The essence of this option seems to be for member states to agree where it makes sense to take action at an international level and where it would be better to act locally.
The report sets out a useful summary of the key features of each option (see page 15 of the report).
Next steps will be for UN members to decide which (if any) option to pursue, followed by a potentially lengthy period setting out what would be required. In the meantime, it seems likely that elements of the OECD Pillars will start coming into force (particularly, the Pillar 2 minimum top-up taxes).
The Financial Times (29 August) quotes Bill Morris, global tax policy leader at PwC, as saying that the ‘possibility of a larger role in international tax for the UN must be taken seriously’, with Morris warning that businesses would be concerned at a potential ‘fracturing’ of global tax affairs.
