SC Contribution – WITHDRAWAL OF DIGITAL SERVICES TAXES & RELEVANT SIMILAR MEASURES, 25 January 2023
COMMENTS ON PILLAR ONE – AMOUNT A: DRAFT MULTILATERAL CONVENTION PROVISIONS ON DIGITAL SERVICES TAXES AND OTHER RELEVANT SIMILAR MEASURES
The BEPS Monitoring Group, 25 January 2023
The BEPS Monitoring Group submitted comments to the public consultation on the draft provisions on withdrawal of Digital Services Taxes and ‘relevant similar measures’. Abdul Muheet Chowdhary, Senior Programme Officer of the South Centre Tax Initiative, was a contributor.
These draft articles would be included in the multilateral convention (MLC) to implement a new taxing right (Amount A), allowing states that decide to join the MLC to tax around 100 of the largest and most profitable multinational enterprises (MNEs) on a share of their ‘residual’ profits (25% of global profits over 10%), based on sales. In exchange, participating states would be required to withdraw any digital services taxes (DSTs) listed in Annex A of the MLC. Also, if they subsequently introduce any DSTs or ‘relevant similar measures’, as defined in these draft articles, they would lose their Amount A allocations.
Negotiations are continuing on some dozen issues, including the criteria for de facto discrimination, which we suggest should include a purpose test. and we urge further clarification also on others, in particular whether withholding taxes on fees for services would be treated as relevant similar measures.
Each country should carefully evaluate its potential gains from Amount A against the losses from measures proscribed under the MLC, following a full public debate. From the available evidence, our expectation is that many countries will find their projected allocation of Amount A from the MNEs in its scope to be insufficient. The narrower the scope of the proscription of alternative measures, the more likely it would be that countries would join the MLC, although its complexity will also be a deterrent, especially for low capacity countries.
Download the comments here.
This article was tagged: Amount A, Base Erosion and Profit Shifting Project (BEPS), Digital Service Taxes (DSTs), Global Tax, Global Taxation, Inclusive Framework, International Tax, International Tax Cooperation, International Tax Reform, International Taxation, Multinational Enterprises (MNEs), Organisation for Economic Co-operation and Development (OECD), Pillar One, Tax, Tax Cooperation, Tax Law, Tax Policy, Tax Reform, Taxation, The Multilateral Convention (MLC)