South Centre Comments on Pillar One – Amount B, August 2023
South Centre Comments on Pillar One – Amount B August 2023
The South Centre submits the following comments and recommendations to the OECD Secretariat on Pillar One – Amount B.
Pillar One
SC Contribution – TAXING MULTINATIONALS: THE BEPS PROPOSALS AND ALTERNATIVES, 6 July 2023
TAXING MULTINATIONALS: THE BEPS PROPOSALS AND ALTERNATIVES
BEPS Monitoring Group, 6 July 2023
This briefing by the BEPS Monitoring Group (BMG) analyses the outcomes of the latest phase of the G20/OECD project on base erosion and profit shifting, and outlines options and alternatives, especially for developing countries. The BMG is a network of experts on various aspects of international tax, set up by a number of civil society organizations which research and campaign for tax justice including the Global Alliance for Tax Justice, Red de Justicia Fiscal de America Latina y el Caribe, Tax Justice Network, Christian Aid, Action Aid, Oxfam, and Tax Research UK. This report has not been approved in advance by these organizations, which do not necessarily accept every detail or specific point made here, but they support the work of the BMG and endorse its general perspectives. It is based on previous reports, and has been drafted by South Centre’s Abdul Muheet Chowdhary, Alex Cobham, Emmanuel Eze, Tommaso Faccio, Jeffery Kadet, Bob Michel, and Sol Picciotto.
SC Statement – Two Pillar Solution, 28 July 2023
Statement by the South Centre on the Two Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy
28 July 2023
The South Centre takes note of the Outcome Statement by 138 member jurisdictions of the OECD/G20 Inclusive Framework (IF) made on 11 July 2023, on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. In this statement the South Centre highlights the inclusion of rules that have the practical effect of reducing the tax payable to developing countries under Amount A, the limitations of Pillar Two and other key aspects of the OECD proposed rules that require attention by developing countries before they decide to be tied up by such rules.
Tax Cooperation Policy Brief 33, 26 June 2023
Taxation of Digital Services: what hope for the African States?
By ADJEYI Kodzo Senyo, KOUEVI Tsotso and AMAGLO Kokou Essegbe
Globalization makes it necessary to adapt multinational taxation by taking into account the place of use or consumption of goods and services. “Pillar 1” of the OECD aims to allow States in which multinationals market products or services, or collect data and content from users, to benefit from a portion of their residual consolidated worldwide profit. Since residual profit is a function of the turnover and profit achieved in the jurisdiction, this solution can only be an advantage if, beyond the rules of fair taxation, efforts are made to promote the use of digital services. Internet access is one of the levers that can increase the consumption of digital services. The current situation in Africa according to statistics published by the International Telecommunication Union (ITU) shows low rates of internet access compared to other continents.
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.
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.
South Centre Comments on the Amount A Draft MLC Provisions on DSTs & Other Relevant Similar Measures, 20 January 2023
South Centre Comments on the ‘Amount A Draft Multilateral Convention Provisions on Digital Services Taxes and Other Relevant Similar Measures’
The South Centre provided its comments to the OECD Inclusive Framework’s Task Force on Digital Economy (TFDE) on the Draft Multilateral Convention Provisions on Digital Services Taxes and other Relevant Similar Measures under Amount A of Pillar One (MLC). This MLC is part of the components of Pillar One to address the tax challenges arising from the digitalization of the economy. It aims to restrict countries which sign to the Pillar One MLC from implementing any digital tax policy solution apart from the OECD’s, such as Digital Service Taxes (DSTs) and other relevant similar measures.
These draft provisions are amongst the most controversial aspects of the Pillar One rules, as countries which decide to implement the OECD solution will be expected to give up the use of DSTs and similar measures on all companies, not just those in-scope of Amount A.
Tax Cooperation Policy Brief 27, 21 December 2022
Taxing Big Tech: Policy Options for Developing Countries
By Abdul Muheet Chowdhary and Sébastien Babou Diasso
Even as the COVID-19 crisis wreaked havoc on the global economy, it gave rise to a small set of winners, namely Big Tech. The increasing prevalence of remote work and an acceleration of the digitalization of the economy allowed Big Tech companies to raise enormous revenues during the pandemic, which in some cases dwarfed the gross domestic product (GDP) of several countries. This policy brief explores the rising untaxed profits of Big Tech in particular, and the digitalized economy in general, and explains why the existing rules are insufficient. It also critically examines the solution that has been devised by the Organisation for Economic Co-operation and Development (OECD), an intergovernmental organization of developed countries. Finally, it outlines alternative policy options that are more suitable for developing countries to tax the profits of Big Tech.
South Centre Comments on Progress Report on Administration and Tax Certainty Aspects of Amount A, 11 November 2022
South Centre Comments on the ‘Progress Report on the Administration and Tax Certainty Aspects of Amount A of Pillar One’
The South Centre submits the following comments and recommendations to the OECD Inclusive Framework’s Task Force on Digital Economy (TFDE) on the Progress Report on the Administration and Tax Certainty Aspects of Amount A of Pillar One.
Tax Cooperation Policy Brief 26, 31 October 2022
Revenue Effects of the Global Minimum Corporate Tax Rate for African Economies
By Seydou Coulibaly
This policy brief provides the first piece of empirical evidence on the revenue implications of the recent global minimum tax rate reform agreement for African economies. We implement a regression discontinuity design to evaluate the effect of having an effective corporate tax rate of at least 15% on tax revenue collection for a panel of 28 African economies over the period 2000-2020.
The estimation results indicate that the implementation of the global minimum effective corporate tax rate of 15% proposed under Pillar II of the Organisation for Economic Co-operation and Development (OECD) Two Pillar Solution has a positive but not statistically significant likely impact on corporate tax revenue and total tax revenue at the conventional significance levels. This suggests that the global minimum tax deal is unlikely to increase tax revenue for African economies. These findings exhort the Inclusive Framework and all the stakeholders of the global tax reform negotiations to consider revising the global minimum tax rate rules to ensure that the agreement will effectively benefit African countries through better tax revenue collection.
Research Paper 165, 4 October 2022
Evaluating the Impact of Pillars One and Two
By Suranjali Tandon and Chetan Rao
The proposed OECD Pillar One and Two reforms mark a significant shift in the way large multinational enterprises are taxed on their global incomes. However, while considering the reform at the proposed scale tax administrators must be able to compare the revenue gains with alternatives. This paper uses open-source data to provide tentative estimates of the impact of Pillars One and Two. The methodology has been detailed so that administrators can replicate it for comparison. Further, the paper provides an assessment from the perspective of developing countries of some of the key design elements of the proposals so as to understand whether they are administrable and to foresee possible challenges.
SC Contribution – Comments on Amount A of Pillar One, 24 August 2022
PROGRESS REPORT ON AMOUNT A OF PILLAR ONE
The BEPS Monitoring Group, 24 August 2022
The BEPS Monitoring Group submitted comments to the Public Consultation on the Progress Report on Amount A of Pillar One released by the OECD in July on behalf of the Inclusive Framework on BEPS. Abdul Muheet Chowdhary, Senior Programme Officer of the South Centre Tax Initiative, was a contributor.