The OECD has been relatively tight-lipped about the progress of discussions regarding pillar one since February. Member states are eager to ensure that international tax negotiators meet the deadline for completing work on this pillar. During the OECD's annual Ministerial Council Meeting, delegates emphasized the urgency for all members of the Inclusive Framework to finalize work on pillar one swiftly, aiming to sign the Multilateral Convention (MLC) by the end of June.
As the deadline approaches, the OECD's updates on the talks regarding pillar one have been scarce since the release of a report in February focusing on amount B. This report aimed to simplify and streamline the application of the arm's-length principle to baseline marketing and distribution activities, particularly addressing the needs of low-capacity countries. The proposed changes are set to be incorporated into the Commentary of the OECD Model Tax Convention. The OECD also mentioned that further work on the interdependence of amount B and amount A under pillar one would be conducted before the signing and entry into force of the Multilateral Convention.
The Multilateral Convention is crucial in addressing key aspects of international tax reform, including the reallocation of taxing rights, tax certainty, removal of digital services taxes, global consensus, and consistency and efficiency. By obviating the need to renegotiate bilateral tax treaties, the MLC aims to bring uniformity to tax rule application across various jurisdictions.
However, the Multilateral Convention is already behind schedule. The Outcome Statement on the progress of the talks in July 2023 indicated that the Inclusive Framework had finalized the text of a draft convention, slated for signature in the latter half of 2023, with implementation scheduled for 2025. The text was made public in October 2023.
Despite the urgency surrounding the completion of work on pillar one and the impending deadline for signing the Multilateral Convention, the OECD's Centre for Tax Policy and Administration had not responded to requests for comment regarding the progress of talks at the time of publication.
By fLEXI tEAM
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