by Julie Martin, MNE Tax
The OECD Secretariat today released a consultation document to assist in the design of a global minimum tax proposal aimed at preventing multinationals from paying little or no tax.
The proposal, called the global anti-base erosion (GloBE) proposal or “Pillar Two” proposal, would give countries additional taxing rights over multinational group profits if other countries fail to exercise their primary taxing rights.
The GloBE consists of an income inclusion rule that would tax the income of a foreign branch or controlled entity if that income was subject to tax at an effective rate below a minimum rate. This would be complemented with an undertaxed payment rule that would deny a deduction or impose source-based taxation, such as a withholding tax, on payments to a related party that are not subject to tax at a minimum rate.
A collation of 130+ countries known as the “Inclusive Framework on BEPS” in January agreed to examine and develop the Pillar Two proposal on a “without prejudice basis.” Work on Pillar Two was later added to a Programme of Work agreed to by the Inclusive Framework in May.
Today’s document is not a consensus document of the Inclusive Framework. Rather, the OECD Secretariat is asking for feedback on several aspects of the GLoBE proposal’s design.
The OECD said that comments on three aspects are particularly needed, namely, the use of financial accounts as a starting point for determining the tax base; the extent to which an MNE can combine income and taxes from different sources in determining the effective (blended) tax rate on such income; and stakeholders’ experience with, and views on, carve-outs and thresholds that may be considered as part of the GloBE proposal.
Comments are requested by December 2. A public consultation meeting on the developments under Pillar Two will be held on December 9 at the OECD Boulogne in Boulogne-Billancourt.
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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