Amount A

Research Paper 156, 1 June 2022

A Tough Call? Comparing Tax Revenues to Be Raised by Developing Countries from the Amount A and the UN Model Treaty Article 12B Regimes

By Vladimir Starkov and Alexis Jin

In this research paper, we attempt to estimate the tax revenues to be gained (or lost) by the South Centre and African Union’s Member States under the Amount A and Article 12B regimes. Our analysis relied on sources of information available to private sector researchers but did not involve review of any information that taxpayers provide to tax authorities. Our research demonstrates that the comparative revenue effects of the Amount A and Article 12B taxation regimes largely depend on (a) design details of the Article 12B regime, (b) whether the country hosts headquarters of MNEs that may be in scope of Amount A or Article 12B taxation, and (c) what relief from double taxation, if any, the country will grant to domestic taxpayers subject to taxation under either the Amount A or Article 12B regimes.

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South Centre Comments on Regulated Financial Services Exclusion, 20 May 2022

South Centre Comments on Regulated Financial Services Exclusion

The South Centre today provided its comments to the OECD Inclusive Framework’s Task Force on Digital Economy (TFDE) on the Amount A: Regulated Financial Services Exclusion. These rules are part of the overall OECD project on the taxation of the digitalized economy known as Pillar One. They determine the amount of a Multinational Enterprise’s (MNE) profits that will then be partially redistributed to market jurisdictions, which are expected to be largely developing countries.

The Regulated Financial Services Exclusion seeks to remove financial institutions such as banks, insurance companies and asset managers from the scope of the tax, known as Amount A. This may greatly reduce the amount of tax that can be collected by the developing countries from the OECD solution.

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South Centre Comments on Extractives Exclusion, 29 April 2022

South Centre Comments on Amount A: Extractives Exclusion

The South Centre today provided its comments to the OECD Inclusive Framework’s Task Force on Digital Economy (TFDE) on the Amount A: Extractives Exclusion. These rules are part of the overall OECD project on the taxation of the digitalized economy known as Pillar One. They determine the amount of a Multinational Enterprise’s (MNE) profits that will then be partially redistributed to market jurisdictions, which are expected to be largely developing countries.

Extractive Exclusion is of critical importance to developing countries as it is meant to ensure that revenues from natural resources such as mining, oil, gas, etc are excluded from the scope of the tax, known as Amount A.

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South Centre Comments on Draft Model Rules for Domestic Legislation on Scope, 19 April 2022

South Centre Comments on Draft Model Rules for Domestic Legislation on Scope

The South Centre today provided its comments to the OECD Inclusive Framework’s Task Force on Digital Economy (TFDE) on the Draft Model Rules for Domestic Legislation on Scope. These rules are part of the overall OECD project on the taxation of the digitalized economy known as Pillar One. They determine the amount of a Multinational Enterprise’s (MNE) profits that will then be partially redistributed to market jurisdictions, which are expected to be largely developing countries.

The Model Rules for Domestic Legislation on Scope are of importance as this affects which Multinational Enterprises (MNEs) will come under the scope of the “digital” tax, known as “Amount A” of Pillar One. In other words, they determine which companies will finally pay the tax.

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SouthViews No. 220, 28 de junio de 2021

Mejora la regla del nexo para una distribución justa de derechos fiscales a países en vías de desarrollo

Por Radhakishan Rawal 

Uno de los problemas abiertos para Pilar Uno en el debate de la tributación de la economía digital es el umbral del Nexo, que determinaría qué Empresas multinacionales (MNE) tienen una presencia tributable. Las economías muy desarrolladas o las economías más pequeñas en vías de desarrollo pueden verse privadas de derechos fiscales como resultado de umbrales de nexo como son descritos en la propuesta de Pilar Uno. Asimismo, inclusive cuando se adoptan umbrales más pequeños, a algunos países aún se les puede denegar derechos fiscales. El umbral financiero nunca fue un parámetro de distribución de derechos fiscales entre los países. Un ligero ajuste del proceso de certeza impositiva podría abordar el problema.

Este artículo recomienda otorgar el derecho fiscal por Monto A de Pilar Uno, que abarca la porción principal de ganancias tributables de la economía digital, a todas las jurisdicciones del mercado, pero otorgar derechos relacionados con las jurisdicciones impositivas afectadas solo a aquellos países que cumplen con los umbrales de Nexo. Este enfoque resultará en una distribución justa de derechos fiscales y también garantizará que no haya una carga adicional en el proceso de certeza impositiva, que será más sencillo para países en vías de desarrollo.

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SouthViews No. 220, 28 Juin 2021

Améliorer des règles du nexus pour une répartition équitable des droits d’imposition pour les pays en développement

Par Radhakishan Rawal

L’une des questions posées dans le Premier Pilier sur les discussions sur l’imposition de l’économie numérique est le seuil du nexus, c’est-à-dire le lien de rattachement au pays, qui déterminerait quelles entreprises multinationales (EMN) ont une présence imposable. Les grandes économies développées ainsi que les petites économies en développement peuvent être privées de droits d’imposition en raison des seuils des nexus tels que décrits actuellement dans la proposition du Premier Pilier. De plus, même si des seuils plus petits sont adoptés, certains pays peuvent encore se voir refuser des droits d’imposition. Un seuil financier n’a jamais été un paramètre de répartition des droits d’imposition entre les pays. Un ajustement mineur dans le processus de certitude fiscale pourrait résoudre le problème.

Cet article préconise d’accorder le droit d’imposition sur le montant A du Premier Pilier, qui couvre la portion principale des bénéfices imposables de l’économie numérique, à toutes les juridictions du marché, mais d’accorder les droits destinés aux juridictions fiscales concernées uniquement aux pays atteignant les seuils du nexus. Cette approche se traduira par une répartition équitable des droits d’imposition et garantira également qu’il n’y ait pas de charge supplémentaire dans le processus de la certitude fiscale, ce qui sera plus facile pour les pays en développement.

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SouthViews No. 220, 28 June 2021

Improve nexus rule for fair distribution of taxing rights to developing countries

By Radhakishan Rawal

One of the open issues for Pillar One in the discussion on the taxation of the digital economy is the nexus threshold, which would determine which Multinational Enterprises (MNEs) have a taxable presence. Big developed economies or smaller developing economies both may be deprived of taxing rights as a result of nexus thresholds as presently described in the Pillar One proposal. Further, even where smaller thresholds are adopted, some countries may still be denied taxing rights. Financial threshold was never a parameter of distributing taxing rights between the countries. A minor tweaking of the tax certainty process could address the issue.

This article recommends giving the taxing right over Amount A of Pillar One, which covers the main portion of taxable profits from the digital economy to all the market jurisdictions, but to give rights related to affected tax jurisdictions only to those countries meeting the nexus thresholds. This approach will result in a fair distribution of taxing rights and will also ensure that there is no additional burden on the tax certainty process, which will be easier for developing countries.

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