By Julie Martin, MNE Tax
MNE Tax has obtained a copy of a slide presentation outlining the US’s latest “Pillar One” and “Pillar Two” proposals for the reform of the international system for multinational group taxation. The presentation was made to the steering group of the Inclusive Framework, a coalition of 139 countries working together on tax issues, on April 8.
As previously reported, the Biden administration’s plan would significantly reduce the number of multinationals subject to Pillar One taxation as compared to the most recent Pillar One compromise proposal, advanced for discussion by the OECD Secretariat, at the expected threshold for taxation of EUR 750 million global revenue.
Fewer than 100 MNEs would be taxed under the US plan. The US proposes that Pillar One, Amount A, apply to all types of multinationals — with some sector-based carve-outs — not just multinationals that sell automated digital services or that are engaged in consumer-facing businesses. Total revenue and profit margin thresholds would ensure that only the largest and most profitable MNE groups are taxed.
The US also said that it is prepared to be flexible regarding nexus thresholds to ensure that some Pillar One tax flows to developing countries.
The proposal is less subjective and simpler to administer, the US argues, especially since the need for business line segmentation is usually avoided.
The US emphasizes in its presentation that it will not accept any Pillar One proposal that discriminates against US firms. Agreement among nations on binding and non-optional dispute prevention and resolution is mandatory for US agreement.
The US says the Pillar One and Two proposals are tied together. Enactment of the OECD’s Pillar Two Blueprint framework would be a “generational achievement” that can end countries’ race to the bottom regarding the taxation of multinational groups, the Biden administration says.
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].
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