By Julie Martin, MNE Tax
The US will no longer require that any coordinated “Pillar One” update to the international tax and transfer pricing rules be drafted as a “safe harbor.”
The announcement came from US Treasury Secretary Janet Yellen, who spoke virtually at a G20 finance minister meeting today, Reuters reports.
“Secretary Yellen announced that we will engage robustly to address both Pillars of the OECD project and that the United States is no longer advocating for ‘safe harbor’ implementation of Pillar 1,” a US Treasury official confirmed, according to Reuters.
In a letter to G20 officials released yesterday, and in several phone calls to world leaders since she took office, Yellen has confirmed that the Biden administration is committed to the multilateral process for reaching compromise on Pillar One. The proposal would overhaul the global rules for allocating multinational group profit and related taxing rights among countries, granting additional tax rights to countries where customers reside.
As early as December 2018, US officials expressed support for a compromise proposal, known as the “unified approach to pillar one,” crafted by the OECD Secretariat. The aim of the OECD Secretariat’s work was to promote agreement among a coalition of almost 140 countries, known as the “Inclusive Framework on BEPS.”
However, in a surprising development, in December 2019, US Treasury Secretary Stephen Mnuchin revealed that the US no longer supported the compromise proposal. Mnuchin said that business opposition to the plan and its additional taxation was too fierce, and therefore the proposal would never gain the support of US Congress. The US was willing to explore a new, alternative, safe harbor approach to “pillar one,” though, Mnuchin said.
The new safe harbor condition threw global negotiations into a tailspin, however, because it was advanced at such a late stage in the discussions and could not gain the support of many countries.
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
Latest posts by Julie Martin (see all)
- UN committee considers updates to model tax treaty, developing nation tax guidance - April 21, 2021
- UN Committee of Experts approves new digital tax article for model treaty - April 20, 2021
- Leaked copy of US proposal for Pillar One and Two multinational group tax reforms available - April 12, 2021
- US offers new “Pillar One” compromise plan for taxing large multinationals - April 8, 2021
- UN tax committee releases updated model treaty language on automated digital services - April 7, 2021
Be the first to comment