By Julie Martin, MNE Tax
The Biden administration has proposed a new “Pillar One” scheme for taxing multinational groups to a coalition of 139 countries known as the Inclusive Framework, Bloomberg Tax and the Financial Times reported today.
The US proposes that new Pillar One rules for allocating multinational group profit among countries would apply to “no more than 100 multinational enterprises that meet both revenue and profit-margin thresholds, regardless of their industry,” Bloomberg Tax said. Countries must also adopt a “pillar two” global minimum tax, recently promoted by US Secretary of the Treasury Janet Yellen.
The Pillar One proposal would alter the global rules for allocating multinational group profit and related taxing rights among countries, granting additional taxing rights to countries where customers reside.
In comparison to the US plan, the OECD Secretariat’s most recent compromise Pillar One proposal would have applied to 2,300 MNEs at an expected threshold for taxation of EUR 750 million global revenue. The OECD’s compromise proposal would be applicable only to multinationals that sell automated digital services or that are engaged in consumer-facing businesses. It did not require profitability as a precondition to taxation.
Inclusive Framework countries are endeavoring to reach an agreement on new rules for taxing multinational groups by mid-2021. A previous end-of-2020 deadline passed without success, in large part due to the US, which previously insisted that any Pillar One proposal be crafted as an optional “safe harbor.”
In February, though Yellen announced that the US had dropped the safe harbor requirement and pledged to “engage robustly” on both Pillar One and Pillar Two.
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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