5.5.2020

OECD Tax Talk #14 - 31 January 2020

At the end of January 2020, Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, Grace Perez-Navarro, Deputy Director of the OECD Centre for Tax Policy and Administration, Matt Andrew, Head of Tax Treaty, Transfer Pricing and Financial Transaction Division, Sophie Chatel, Head of Tax Treaty Unit and Achim Pross, Head of International Co-Operation and Tax Administration Division informed about the progress of the BEPS project with a new Tax Talk.

Short summary

In particular, the webinar will focus on developments since last October and the results of the Inclusive Framework (IF) Planary in January. Although finding a consensus on the implementation of the taxation of the digital economy still poses challenges, the team around Pascal Saint-Amans and the IF itself is confident that a solution will be found and presented by the end of 2020.

As no agreement could be reached on the solution proposed by three groups of states for the "Nexus and Profit Allocation", summarised under the first pillar, a "Unified Approach" was chosen instead. This "Unified Approach" was published in October 2019 as a non-binding proposal by the OECD secretariat and simultaneously triggered a consultation period. Based on the feedback received, the IF created three new individual quantities (A, B and C), which together form the basis for negotiations to find further solutions by the end of 2020.

In order to exclude the possibility of double taxation, quantities A, B and C were examined for interdependences. Such a dependency was found between quantities A and C and must now be eliminated. Furthermore, the different tax categories under which companies can fall and possible regional segmentations must be discussed and defined in more detail. Therefore, mainly technical points and their implementation remain to be checked.

The GloBE proposal under the second pillar continues to consist of an integrated system of four rules and has not changed in this respect since October. These four rules are: The Switch-Over Rule, the Underpayment Rule, the Subject-to-Tax Rule and the Income-Inclusion Rule, which is based on the CFC rules. According to Achim Pross, it remains to be discussed how the different rules interact with each other in order to ensure that companies that have previously benefited from a too low tax burden are not suddenly double taxed.

Conclusion

The IF has made clear progress in recent months on technical implementation, but important steps remain to be clarified and completed. For example, it still needs to be evaluated how the different design options interact with each other and how they can be implemented on a technical level. Above all, the with the rules associated complexity, compliance and administration costs must be limited in order to ensure the feasibility of the BEPS project. With a wink Pascal Saint-Amans referred to the rather ambitious timeline of the emerging work of the BEPS project to reach a consensus by the end of 2020 and said goodbye until the next webinar.

Do you have any questions about Tax Talk #14?
Authors
:
Viktor Bucher
Tags:
BEPS
International Taxation