In a new blog message, the Secretary General of the OECD, Angel Gurría, recently placed the position on “a turning point for tax: international co-operation for better regulation of globalization” (Feb. 1, 2021) in the OECD Forum. In his statement, Gurría highlights that, due to the increasing complexity in the world of taxing multinational companies, cooperation between nation states will be more important than ever before. He also refers to the OECD’s huge policy project on Pillar I and Pillar II tax proposals.
While Pillar I is about new taxing rights on so-called “residual profits in the market jurisdictions” where the multinational group’s profit can be assigned to, Pillar II refers to the minimum tax level imposed to the multinational group. Both elements of this ongoing discussion of a fundamental shift in international taxation in the decade of the 2020s are thought to help mitigating today’s inadequacy in corporate taxation, the lack of transparency, and the insufficient fairness in the tax burden within countries and across jurisdictions, industries, taxpayers, and tax types. Reviewing the online sessions of the last three months or so, one may come to the conclusion that consumption-based measures are considered the resolving feature of corporate income taxation, in particular with regard to the digitalized business models.
Yet, the OECD’s call for more cooperation between countries in the policy field of taxation could also be interpreted somehow differently – at least from a political economy perspective. If the Pillar I and Pillar II models are far away from being realized and implemented, nation states in the foreseeable future in which digitalization evolves with the velocity of light, maybe the cooperation model, as for example it was with the Advance Pricing Agreements of the last decades since late 1990th, could become the turnaround in order to achieve, at least, some progress in the mess and insufficiencies of today’s corporate tax regimes of cross-border business between related-parties of multinational groups.
See the OECD Blog: A Turning Point for Tax: International co-operation for better regulation of globalisation | The OECD Forum Network (oecd-forum.org)
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