Oecd Tax Certainty Unit

Dispute prevention: the need for a coordinated approach to audits, ideally centralised at the level of the designated supervisory body/reporting body, and consider developing an early security process, possibly inspired by the first pillar. This group will continue to discuss Amount A, focusing on the scope of the provision, including exclusions for raw materials. and regulated financial services. It will also address issues related to the elimination of double taxation, safe havens for marketing and distribution, and withholding taxes. Tax certainty issues will be addressed during Session IX. With this in mind, the Inclusive Framework is working on a solution based on a series of reviews: (1) a security screening in areas where investments in systems are needed; (2) an examination of the security of the scope of application to determine whether a multinational enterprise group falls within the scope; (3) a complete examination of the security of calculating the A amount and reallocation; and (4) a decision-making body to resolve disagreements about these reviews. The OECD Tax Conference in Washington, DC, which was last held in June 2019, shortly after the publication of the first BEPS 2.0 work plan, provided an opportunity for dialogue on the latest developments on the first and second pillars as well as other OECD work on taxation. The round tables were composed of members of the OECD Secretariat, national tax officials and business representatives. Each mechanism is voluntary in the selection of the MNE Group. Multinational enterprises that do not fall within the scope would opt for the scope review to confirm that they do not fall within the scope, while a multinational that does not fall within the scope could opt for ex ante verification in order to obtain prior certainty on certain aspects of compliance with Amount A for future periods, and/or a comprehensive security review for more complete assurance of A level compliance for completed periods. Each review mechanism would be supported by “investigative bodies” to resolve any disputes that may arise between tax administrations in relation to the processes. The draft A Amount provides more than 80 pages of overviews and detailed descriptions of how determination mechanisms and panels might work in practice, the details of which are beyond the scope of this blog post. At a high level, however, we would like to point out that the proposed new mechanisms appear to borrow from the OECD`s relatively new International Compliance Assurance Program (CISP).

[2] Similar to ICAP, the proposed new mechanisms provide for relatively streamlined, consensus-based multilateral processes coordinated by a lead tax administration (typically the ultimate parent tax authority) and including standardized documentation as a starting point for review. Unlike ICAP, but similar to initial price agreements (APAs), these mechanisms would provide binding certainty to multinational companies. The event provided an opportunity for tax policy makers, tax administrations, business representatives and other stakeholders to take stock of the tax security agenda and seek further improvements in dispute prevention and resolution. Companies should closely monitor developments, both in global discussions and in implementation activities in countries relevant to their footprint. Businesses should also seize the opportunity to contribute to particularly important areas through consultation processes at OECD and country level. Given the significance of the changes under development, it is important to assess the potential impact of the new rules and assess what system and process changes may be required to capture the data needed to comply with these rules. Business representatives emphasized the importance of stability, dispute resolution and an administerable system. They noted that good fiscal policies are essential for sustainable inclusive growth and stressed the need for certainty on these two pillars.

The question was raised as to whether it was appropriate for the US to make changes to the GILTI rules before other countries had implemented the second pillar rules. The need to take the time to get it right was emphasized. So far, the OECD has only published draft rules to help countries implement the A amount in addition to the second pillar of the review, which includes minimum taxation rules. The organization has also published public comments on its proposed A-Amount rule, including calls for guidance that would allow multinational enterprises to obtain prior certainty on how tax administrations would apply the new rules, including a proposed anti-abuse provision. Mr Perraud defended summer time, introduced by several countries, but stressed that the global solution of the first pillar was necessary. He considered that time is crucial for the completion of the OECD`s results and stressed that the issues addressed in the inclusive political framework agreement of October 2021 do not need to be raised again. At the same time, his comments advocated allowing time for stakeholders to provide input. He pointed out that the consolidated consultation paper will show how the parts of Amount A fit together, which will help demonstrate the dynamics of the project. He confirmed the France`s commitment to abolish summer time with the introduction of the first pillar. He described tax certainty as important for everyone, saying the first pillar will not fly if the process is not efficient and fast. As recognized by G20 ministers, maintaining and improving tax security benefits both taxpayers and tax administrations and is key to boosting investment, jobs and growth.

This is particularly important and challenging in the context of the economic impact of a pandemic, despite which tax administrations and taxpayers are making immense efforts to advance the tax security agenda. Improving tax certainty is one of the main priorities of the OECD Forum on Tax Administration, which brings together more than 50 advanced and emerging tax administrations. In response to comments from company representatives that the implementation of the first pillar rules of the A amount will be very complex, Williams and Pross acknowledged this. Pross commented: “While the design of Pillar One is not straightforward, some of the perceived complexity could come from its novelty. After the initial administrative difficulties, perhaps some of the complexity will disappear. Williams added that “there is indeed complexity in the first pillar, but there is also complexity in the groups of companies that are subject to the first pillar. There are also significant transfer pricing complexities, such as transactions, that simply do not take place between independent parties. We absolutely have to highlight the complexities, but we have to be realistic about the fact that some complexities should be expected in any system. Regarding Pillar B amount, which provides standardised remuneration for day-to-day sales activities, Pross stressed its importance, saying this is something OECD countries have been trying to achieve for decades. He explained that while it would be good to have a broader application of Amount B, “we need to get Amount B off the ground first.” Plovgian agreed that the B amount is a very important part of the benefits that companies should receive as part of the broader BEPS 2.0 project.

He pointed out that an important part of this is having tax security from the start. The representative of Business at OECD noted that WFP was now beginning to deliver better results, while the process of rebuilding confidence was not always obvious to the general public. Pascal Saint-Amans, Director of the OECD`s CTPA, concluded the day by saying that any progress on tax security will be the result of effective co-operation, noting that he believes that the tax community is at the beginning of the process of achieving a higher level of tax security. He described tax security as an important policy objective, while overall implementation “is in the hands of tax administrations”. Before opening the next meeting, Mr. Pross highlighted two topics related to tax certainty that were not on the official agenda at the time: comparative risk assessments and joint and simultaneous audits. He stressed that the OECD Secretariat continued to focus on these two areas. Grinberg said the U.S. Biden administration is also deeply committed to multilateralism. He described the second pillar as helping to create a level playing field, which he said is what the U.S. business community has demanded.

He said the new second-pillar rules force companies to pay modestly more taxes to do justice to the middle class. He expressed the view that these new rules will benefit American businesses and our children. Company representatives identified key issues that need to be carefully addressed in the design of dispute prevention and resolution procedures, noting that at this stage of the work, it is difficult to understand the level of security available in advance.