Tax Reform

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.

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Research Paper 164, 23 September 2022

Impact of a Minimum Tax Rate under the Pillar Two Solution on Small Island Developing States

By Kuldeep Sharma

The Research Paper commences with an overview of Pillar One and Pillar Two followed by detailed discussions on salient provisions of Pillar Two.

Pillar Two is envisaged to have a widespread impact on Small Island Developing States (SIDS) which are a distinct group of 38 United Nations (UN) Member States and 20 Non-UN Members/Associate Members of UN regional commissions that are exposed to unique social, economic and environmental vulnerabilities. In all, 36 SIDS that are members of the Group of Seventy-Seven (G-77) have been analysed, namely, Antigua and Barbuda, Bahamas, Bahrain, Barbados, Belize, Cabo Verde, Comoros, Cuba, Dominica, Dominican Republic, Fiji, Grenada, Guinea-Bissau, Guyana, Haiti, Jamaica, Kiribati, Maldives, Marshall Islands, Mauritius, Federated States of Micronesia, Nauru, Papua New Guinea, Samoa, São Tomé and Príncipe, Seychelles, Singapore, Solomon Islands, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Timor-Leste, Tonga, Trinidad and Tobago, and Vanuatu.

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Documento de Investigación 156, 1 de junio de 2022

¿Una elección difícil? Comparación de los ingresos fiscales que recaudarán los países en vías de desarrollo a partir de los regímenes del Monto A y del Artículo 12B de la Convención Modelo de las Naciones Unidas

Por Vladimir Starkov y Alexis Jin

En este documento de investigación, pretendemos calcular los ingresos tributarios que obtendrán (o perderán) los Estados miembros del South Centre y la Unión Africana con arreglo a los regímenes del Importe A y del Artículo 12B. En nuestro análisis hemos recurrido a fuentes de información disponibles para el personal investigador del sector privado, aunque no ha conllevado el examen de ninguno de los datos que los contribuyentes proporcionan a las autoridades fiscales. Nuestra investigación demuestra que los efectos comparativos en los ingresos obtenidos con los regímenes fiscales del Importe A y el Artículo 12B dependen en gran medida de a) los detalles de diseño del régimen del Artículo 12B; b) si el país es sede de empresas multinacionales que puedan estar dentro del ámbito de aplicación de los regímenes fiscales del Importe A o del Artículo 12B; y c) la desgravación a partir de la doble tributación, de haberla, que conceda el país a los contribuyentes nacionales sujetos al pago de tributos en virtud del régimen del Importe A o del Artículo 12B.

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South Centre Comments on Progress Report on Amount A of Pillar One, 18 August 2022

South Centre Comments on Progress Report on Amount A of Pillar One

The South Centre offers its comments to the OECD Inclusive Framework’s Task Force on Digital Economy (TFDE) on the Progress Report on Amount A of Pillar One.

In June 2022, the Coalition for Dialogue on Africa (CODA), a Special Initiative of the African Union, and the South Centre, jointly released country-level revenue estimates from Amount A compared with Article 12B of the UN Model Tax Convention, for the 84 combined Member States of the African Union and the South Centre. CODA and the South Centre have also provided a set of recommendations to developing countries on the taxation of the digitalized economy.

The Progress Report on Amount A, the latest version of the OECD’s proposed solution for taxation of the digitalized economy, makes it clear that the revenues expected for developing countries will dwindle even further than estimated by CODA and the South Centre.

With each successive update of the rules, the proposed solution is becoming increasingly less appealing to the developing countries. The OECD must, at a minimum, release revenue estimates for the 141 jurisdictions of the Inclusive Framework such that each can take an informed decision in the national interest. As an organization that sets ‘transparency’ standards, OECD must itself be transparent and provide countries with the essential information needed for making what may become a historic decision for the international taxation regime.

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Tax Cooperation Policy Brief 24, 29 July 2022

A Global Asset Registry to track hidden fortunes and for asset recovery

By Ricardo Martner

Financial opacity and offshore hidden wealth have become a major economic and political problem. Tax havens continue to exist and provide financial secrecy services that allow the richest individuals in the world to hide their wealth from national tax authorities. Implementing a Global Asset Registry could help tax authorities to identify, record and tax all wealth, regardless of where it is held. It would also be a critical tool in efforts to recover stolen assets of countries suffering from widespread corruption.

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Research Paper 161, 26 July 2022

Two Pillar Solution for Taxing the Digitalized Economy: Policy Implications and Guidance for the Global South

by Irene Ovonji-Odida, Veronica Grondona, Abdul Muheet Chowdhary

The taxation of the digitalized economy is the single most important topic in international tax negotiations today. The OECD has devised a “Two Pillar solution” to the problem. Pillar One is focusing on a reallocation of taxing rights to market jurisdictions, which are largely expected to be developing countries, and Pillar Two is instituting a global minimum tax. The Pillar One solution, known as Amount A, will be codified into a Multilateral Convention (MLC) and is expected to be placed before countries for signature in early 2023. The solution ushers in a new paradigm in the taxation of multinational enterprises but has immense complexity and likely minimal revenue gains for most developing countries. It will also require them to give up the right of unilateral tax measures on all out-of-scope companies, meaning they will only be able to tax the fewer than 100 companies likely to be in-scope, if at all. The decision to sign or not is thus a historic one, as it will lock developing countries into a constricted new framework, at a time when revenue needs are especially critical to recover the economies from COVID-19 in the context of a turbulent state of the global economy.

However, the United Nations too has a solution, known as Article 12B. This operates in a different manner and is a minor modification to the existing decentralized international tax system which is based on bilateral tax treaties, and which developing countries are more familiar with. It is also likely to generate far higher revenues than Amount A, and does not restrict any of their sovereign taxing rights. This Research Paper assesses the various implications for developing countries from adopting the OECD’s or the United Nations’s respective solutions and concludes with a possible global South response to the Two Pillar solution.

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Outcomes – CoDA-South Centre Dialogue Series on IFFs, 1 June 2022

Outcomes and Recommendations of the CoDA-South Centre Dialogue Series on Illicit Financial Flows (IFFs): Comparing Tax Revenues to Be Raised by Developing Countries from the OECD and UN Solutions for Taxing the Digital Economy

The Coalition for Dialogue on Africa (CoDA) and the South Centre co-organised the first of a series of dialogues on Illicit Financial Flows (IFFs) on 1st June 2022. The dialogue was convened mainly to launch and discuss a research paper jointly commissioned by CoDA and the South Centre titled ‘A Tough Call? Comparing Tax Revenues to Be Raised by Developing Countries from the Amount A and the United Nations Model Treaty Article 12B Regimes’.

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Document de Recherche 156, 1 juin 2022

Un choix cornélien ?

Comparaison des recettes fiscales à engranger par les pays en développement au titre des régimes du Montant A et de l’Article 12B du Modèle de convention des Nations Unies

Par Vladimir Starkov et Alexis Jin

Le présent document de recherche se propose d’estimer le montant des recettes fiscales qui seraient engrangé (ou perdu) par les pays membres du Centre Sud et de l’Union africaine dans le cadre de la mise en œuvre du Montant A et de l’Article 12B. Notre analyse s’appuie sur des sources d’information accessibles aux chercheurs du secteur privé et non sur les informations communiquées par les contribuables aux autorités fiscales. Elle démontre que les effets comparatifs sur les recettes de la mise en œuvre du Montant A et de l’article 12B dépendent en grande partie (a) des détails de conception du régime mis en place par l’article 12B, (b) du fait que le pays accueille ou non le siège d’entreprises multinationales susceptibles d’être imposées au titre du montant A ou de l’article 12B, et (c) de l’allégement éventuel de la double imposition qui sera accordé par le pays aux contribuables nationaux imposés au titre du Montant A ou de l’article 12B.

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