By Doug Connolly, MNE Tax
The OECD is working on a framework to prevent countries from enacting unilateral tax measures, such as digital services taxes, as part of an agreement under the “Pillar One” negotiations on modified rules for the allocation of taxing rights among nations, according to Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration.
Speaking virtually at an April 30 International Tax Policy Forum conference, Saint-Amans said that he believes that from a political standpoint, there is already agreement on this issue. That is, countries that have proposed digital services taxes have generally proposed them to apply until an international agreement is reached or only if no international agreement is reached.
The OECD is attempting to create an objective framework to implement this understanding that a Pillar One agreement replaces unilateral measures. The framework would seek to define criteria for identifying unilateral measures that conflict with the agreement.
The framework would distinguish legitimate exercises of sovereignty from problematic unilateral measures.
On the one hand, for example, if a country wants to increase its value-added tax rates on particular types of goods, “nobody cares about that,” Saint-Amans said. On the other hand, the framework would target, for instance, unilateral measures that aim to raise tax revenue from a subset of companies that are largely foreign.
An enforcement mechanism will accompany the framework for identifying unilateral measures. Saint-Amans said that the enforcement would largely be based around peer review. Countries will commit as part of the broader agreement to “dismantle their unilateral measures,” and the peer reviews will aim to ensure that the countries follow through on that commitment.
If peer review is insufficient to pressure countries to comply with the agreement, then Saint-Amans suggested countries will still have other means to protect their interests, such as retaliatory trade measures. However, the agreement would seek to make such measures a last resort and ideally unnecessary.
Doug Connolly
Doug Connolly is Editor-in-Chief of MNE Tax. He has more than 10 years of experience covering tax legal developments, previously working with both a Big Four firm and a leading legal publisher. He holds a law degree from American University Washington College of Law.
Latest posts by Doug Connolly (see all)
- OECD transfer pricing guidelines get first update in five years - January 20, 2022
- EU’s path forward on global minimum tax is under debate - January 18, 2022
- Switzerland will implement global minimum tax by constitutional amendment - January 13, 2022
- UK sets out approach to global minimum tax implementation - January 11, 2022
- OECD’s ‘complex’ minimum tax rules have ‘major policy issues,’ BIAC says - January 7, 2022
Be the first to comment