Businesses will be pleased with the efforts made in this area by Inclusive Framework countries, even though there continues to be differences of view on the scope of mandatory binding dispute resolution beyond Amount A. The commitment to an innovative solution to deliver early certainty alongside effective dispute prevention and resolution for Amount A is essential to ensuring that a new international framework does not hinder economic growth. Businesses will be keen to understand the potential availability of pre-regime losses for offset against Amount A profits, particularly given the economic downturn caused by COVID-19. There is reference to some countries preferring credit relief where the residual profits country has a higher tax rate than the market country, which appears to be out of line with the rationale for reallocation of taxing rights. It is expected that credit relief and the interaction with existing complex domestic regimes will prevent effective relief from double taxation. Consideration is being given to the phasing in of the Amount A rules starting with the very largest multinationals (possibly those with annual consolidated revenues in excess of $10 billion or $5 billion) to help tax authorities provide certainty to in-scope businesses.īusinesses will be concerned that there is little detail on the interaction of Amount A and existing taxing rights in market countries, in particular withholding taxes on royalties, and also that countries have the option of specifying credit relief for double taxation rather than exemption. The Blueprint does not compromise on the complexity of the proposed rules, in particular as regards the determination of ‘paying entities’ that will give up taxing rights over profits in favour of the market countries. Extractive industries, natural resources and commodities are also excluded, alongside airlines, shipping and residential property businesses. Financial services businesses will be pleased to see proposals for broad exclusions for banking, insurance and asset management businesses, subject to political agreement.
Key scope issues remain undecided, such as the application of the rules to the pharmaceutical sector. The proposed new taxing right, Amount A, remains focused on two broad sectors: automated digital services and consumer-facing businesses. reallocation percentages and thresholds, whether Amount A could be an optional safe harbour) and technical areas (the requirements for segmentation) where differences of view remain.
It identifies a number of specific policy matters (e.g. The Blueprint sets out the technical work that has continued, conducted by the OECD Secretariat with significant input from Inclusive Framework representatives, despite the lack of political progress. As a result, the Blueprint identifies areas where Inclusive Framework countries are not yet aligned, and options that countries might consider in their continued efforts to reach consensus. The Blueprint does not have the political agreement that the G20 had originally hoped for when setting the ambitious target of completing work on the tax challenges of the digitalised economy by the end of 2020.
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