The OECD project on the tax challenges arising from the digital economy, which has kept international tax and transfer pricing practitioners riveted during the past year, has suffered a series setbacks recently. First came the acknowledgement by OECD Secretary-General Matthias Cormann that Pillar One of the OECD’s global tax deal, which would redistribute taxing rights for a portion of the largest corporations’ profits to market jurisdictions, is unlikely to meet the planned 2023 implementation timeline, followed by the UK’s announcement that implementation of Pillar Two in the UK will be delayed so that it applies only to accounting periods beginning on or after 31 December 2023. A few days later, the EU finance ministers failed to agree on the adoption of a directive on the implementation of the Pillar Two Global Anti-Base Erosion (GloBE) rules and the introduction of a global 15% minimum tax for multinationals. Cormann said the Pillar One rules “most likely will end up with a practical implementation from 2024 onwards.” In fact, the OECD and the Inclusive Framework have continued their work formulating the model rules for implementation of Pillar One, issuing two more documents for public consultation. While the OECD’s work on the two-pillar framework on the taxation of the digital economy gets most of the attention, the group is also involved in other long-term projects.
The OECD continued to issue documents for public comment, issuing two consultation documents relating to tax certainty: a Tax Certainty Framework for Amount A and Tax Certainty for Issues Related to Amount A under Pillar One. The documents, issued on 27 May, requested that comments be submitted no later than 10 June. The comments received have now been published.
A central element of Amount A is an innovative tax certainty framework that guarantees certainty for in-scope groups over all aspects of the new rules, including the elimination of double taxation. This eliminates the risk of uncoordinated compliance activity in potentially every jurisdiction where a group has revenues, as well as a complex and time-consuming process to eliminate the resulting double taxation. The Tax Certainty Framework incorporates a number of elements designed to address different potential risks posed by the new rules: a scope certainty review, an advance certainty review and a comprehensive certainty review.