The “safe harbour” issue is included in the list of remaining work, but a final decision on this issue will be deferred until the architecture of Pillar One has been agreed upon.
Members of the OECD’s Inclusive Framework on BEPS have committed to reaching, by the end of 2020, an agreement on a consensus-based, long-term solution to the tax challenges arising from the digitalization of the economy.
The BEPS Inclusive Framework groups 137 countries and jurisdictions on an equal footing for multilateral negotiation of international tax rules.
The Group agreed to pursue the negotiation of new rules on where tax should be paid (“nexus” rules) and on what portion of profits they should be taxed (“profit allocation” rules), on the basis of a “Unified Approach” on Pillar One.
A January 31 statement issued by the Group takes note of a proposal to implement Pillar One on a “safe harbour” basis, as proposed in a December 3, 2019, letter from US Treasury Secretary Stephen Mnuchin to OECD Secretary-General Angel Gurría.
The statement recognizes that many members of the Group have expressed concerns about the proposed “safe harbour” approach. The “safe harbour” issue is included in the list of remaining work, but a final decision on this issue will be deferred until the architecture of Pillar One has been agreed upon, the OECD noted.
The Inclusive Framework also welcomed the significant progress made on the technical design of Pillar Two, which aims to address remaining BEPS issues and ensure that international businesses pay a minimum level of tax.
OECD Secretary-General Angel Gurría said: “It is more urgent than ever that countries address the tax challenges arising from digitalization of the economy, and the only effective way to do that is to continue advancing toward a consensus-based multilateral solution to overhaul the international tax system. We welcome the Inclusive Framework’s decision to move forward in this arduous undertaking, but we also recognize that there are technical challenges to developing a workable solution as well as critical policy differences that need to be resolved in the coming months.”
“The OECD will do everything it can to facilitate consensus, because we are convinced that failure to reach agreement would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy,” Gurría added.
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at email@example.com