South Centre Comments on Pillar One – Amount B, 25 January 2023
South Centre Comments on Pillar One – Amount B
The South Centre provided its comments to the OECD Secretariat on Pillar One – Amount B. Amount B is part of the components of Pillar One to address the tax challenges arising from the digitalization of the economy. It seeks to simplify transfer pricing rules for ‘baseline’ marketing and distribution functions.
Transfer pricing remains a highly complex and challenging area for developing countries. The ultimate objective of transfer pricing is to determine a market price for intra-company transactions, but doing this in practice is a largely subjective exercise, which makes it prone to abuse and profit shifting. Developing countries lose billions of dollars in revenue each year due to abusive transfer pricing.
Amount B is important for developing countries as it seeks to provide a simple method through which in-scope intra-company transactions can be priced, which can potentially ease tax administration, reduce disputes and increase tax certainty. However, the current form of the proposal renders it highly complex and unlikely to achieve its stated objective of simplification.