African Tax Administration Forum responds to ‘historic’ international tax reform

African Tax Administration Forum

The two-pillar package aims to ensure that large multinational enterprises (MNEs) pay tax where they operate and earn profits, while adding much-needed certainty and stability to the international tax system.

African Tax Administration Forum_AfricaThe African Tax Administration Forum (ATAF) has said that further work that needs to be done on digital economy taxation to ensure a more equitable tax allocation and to stem illicit financial flows from Africa.

130 countries and tax jurisdictions, representing more than 90% of global GDP, have joined a new two-pillar plan to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate.

The two-pillar package aims to ensure that large multinational enterprises (MNEs) pay tax where they operate and earn profits, while adding much-needed certainty and stability to the international tax system.

Pillar One will ensure a fairer distribution of profits and taxing rights among countries with respect to the largest MNEs, including digital companies. It would re-allocate some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there.

Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases.

The ATAF welcomed global agreement on the two-pillar digital economy tax reform, it said that it is “important that developed countries do not exert political pressure on developing countries if the process is to produce an equitable outcome.”

“We are also concerned about how the new rules will impact upon countries that are not members of the BEPS Inclusive Framework or countries that choose not to adopt the new rules. We are concerned that political pressure should not be brought on such countries to apply these rules or join the Inclusive Framework. It is important that countries join the Inclusive Framework because they want to join it and not because they have been coerced into joining.”

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