Submission on the OECD Secretariat Proposal for a “Unified Approach” under Pillar One, November 2019

Comments on the OECD Secretariat Proposal for a “Unified Approach” under Pillar One

The South Centre Tax Initiative (SCTI), the South Centre’s flagship program for promoting cooperation among developing countries on international tax matters, submitted its comments in November 2019 to the OECD Secretariat’s Proposal for a “Unified Approach” under Pillar One. This proposal is the key solution proposed by the OECD to address the challenge of taxation in the digital economy. In today’s world, it is a common occurrence that large multinational enterprises pay little or no taxes on their global profits by exploiting gaps in international tax rules. Approximately $500 billion is estimated to be lost globally due to corporate tax avoidance each year. This number is five times the annual requirement for funding the Paris Agreement ($100 billion) and around 20% of the funding requirement for achieving the Sustainable Development Goals in developing countries ($2.5 trillion). Hence, revenue lost to corporate tax avoidance could go a long way in financing sustainable development and actions regarding climate change.

Tax avoidance affects both developed and developing countries;  in response to global concerns and increasing political pressure, the OECD sought to address this issue through its “Inclusive Framework” on Base Erosion and Profit Shifting (BEPS) by updating the rules on international taxation. Below is the text of the South Centre Tax Initiative’s comments on the OECD proposal.

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Comments on the OECD Secretariat Proposal for a “Unified Approach” under Pillar One