Pillar One

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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Informe sobre políticas en materia de cooperación tributaria 15, Junio de 2021

Conceptualización de un Instrumento multilateral de la ONU

Por Radhakishan Rawal

Los cambios que ha sufrido recientemente la  Convención Modelo de las Naciones Unidas sobre la Doble Tributación entre Países Desarrollados y Países en Desarrollo han dado lugar a disposiciones mas favorables a los países en desarrollo, al aumentar los ingresos fiscales a través de la imposición de tributos internacionales, por ejemplo, en la imposición de tributos a los ingresos procedentes del extranjero. En esta imposición se incluyen, entre otros, los impuestos sobre los ingresos procedentes de servicios digitales automatizados, pagos de programas informáticos y plusvalías. Normalmente, estos impuestos se incorporarían en convenios fiscales bilaterales a través de largas negociaciones. En cambio, un instrumento multilateral de las Naciones Unidas permitiria  actualizar de una manera mas acelerada varios convenios tributatrios por medio de una sola negociación. Esto ayudará a los países en desarrollo a recaudar ingresos con mayor prontitud. En este informe sobre políticas se aborda la posible estructura de un instrumento multilateral de esa índole.

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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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South Centre Comments on Draft Model Rules for Tax Base Determinations, 4 March 2022

South Centre Comments on Draft Model Rules for Tax Base Determinations

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 Tax Base Determinations. 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 Tax Base Determinations are of importance as this affects the amount of tax revenues that developing countries will finally be able to collect under the so-called “Amount A” of Pillar One.

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South Centre Comments on Draft Model Rules for Nexus and Revenue Sourcing, 21 February 2022

South Centre Comments on Draft Model Rules for Nexus and Revenue Sourcing

The South Centre offers its comments on the Draft Model Rules for Nexus and Revenue Sourcing. As a procedural matter, the extremely rapid pace of discussions is a matter of great concern for developing countries, a matter also raised by the African Tax Administration Forum (ATAF). While an urgent solution is needed to the taxation of the digitalization of the economy, this must mean one which incorporates the interests of developing countries.

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SouthViews No. 234, 18 February 2022

South Asia and the Need for Increased Tax Revenues from the Digitalized Economy

By Abdul Muheet Chowdhary

It is understandable why Pakistan and Sri Lanka, both members of the OECD Inclusive Framework, rejected the Two Pillar solution of the OECD on the taxation of the digitalized economy. Both Pillars would have deprived them of badly needed revenues, especially Pillar One. South Asian countries, amongst the poorest in the world and with high levels of external debt, must conduct a careful cost-benefit analysis if they are considering proceeding with Pillar One. Agreeing to this means foregoing unilateral measures on all companies, including those out-of-scope and losing vital policy space. Further, the agreement will have a long shelf-life and likely last for the next 30-40 years. Thus, all developing countries, including from South Asia, should be clear about what they are ‘getting into’.

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Rapports sur les politiques en matière de coopération fiscale 15, Juin 2021

Conceptualisation d’un instrument multilatéral des Nations Unies (IML des NU)

Par Radhakishan Rawal 

Les récentes modifications apportées au modèle de convention des Nations unies concernant les doubles impositions entre pays développés et pays en développement ont donné lieu à l’introduction de dispositions plus avantageuses pour les pays en développement en matière d’imposition des revenus, en permettant en particulier l’imposition des revenus étrangers. Il s’agit notamment des revenus tirés des services numériques automatisés, des rémunérations sur les logiciels, de plus-values et autres. Ces dispositions sont généralement intégrées, au terme de longues négociations, dans les conventions fiscales bilatérales. Une convention des Nations Unis, en tant qu’instrument multilatéral, permet en une seule négociation de modifier plusieurs conventions fiscales et contribue ainsi à ce que les pays en développement puissent percevoir plus rapidement des recettes fiscales. Le présent rapport sur les politiques examine la forme qu’un tel instrument multilatéral peut revêtir.

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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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Statement, July 2021

Statement by the South Centre on the Two Pillar Solution to Address the Tax Challenges Arising From the Digitalisation of the Economy

The South Centre takes note of the statement by 130 members of the OECD/G20 Inclusive Framework (IF) on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy. The agreement by the members is indeed historic and marks progress in the right direction. Unfortunately, the agreed upon solution is limited and disappointing as it falls short of the more ambitious and transformational reforms needed for a balanced agreement that fully responds to the concerns of developing countries, especially in the backdrop of the socioeconomic challenges posed by the COVID pandemic. Nine jurisdictions have not agreed with the statement, with the reasons still not public; however, it is a signal that cannot be ignored.

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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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