WASHINGTON – Today, ITI called for the Organisation for Economic Co-operation and Development (OECD) to continue to drive toward a multilateral solution and avoid double taxation in formal comments filed in response to the OECD’s Secretariat Proposal for a Unified Approach to the Nexus and Profit Allocation Challenges Arising from Digitalisation (Pillar 1). Pillar 1 was released in October ahead of a public consultation in Paris November 21-22.
“Our broad objective is to ensure a functioning and dependable international tax system that promotes investment and innovation, while providing certainty and predictability for businesses,” ITI wrote. “ITI strongly supports the OECD as the best forum to achieve these goals.”
In its comments, ITI noted a number of additional high-level principles that should guide the OECD’s work:
- It must be genuinely multilateral. Policies around cross-border taxation are complicated and their application relies on the coordination and cooperation of jurisdictions around the world. There is widespread global recognition that elements of the system need to be modernized in addition to strong interest in pursuing reforms. As such, we strongly believe such global problems require a coordinated solution.
- It must involve the removal of unilateral measures. Since the end of the BEPS project, unilateral measures have proliferated, including diverted profits taxes (DPTs), equalization levies, multinational anti-avoidance laws (MAALs) and digital services taxes (DSTs). The current OECD process must be explicitly predicated on removal of these measures in exchange for a global solution such as that discussed in our submission.
- It must be a principled approach that avoids double taxation. As the OECD contemplates innovative approaches beyond standard transfer pricing practice, it is important that the policy outcomes be principled and focused on avoiding double, or even multiple, taxation.
- It must avoid optionality for countries. In the past, OECD negotiations have resulted in a menu of options for jurisdictions to choose from. Given the novel elements of these reforms, that outcome must be avoided in this context. Countries cannot be given license to cherry pick elements of these policies to achieve bespoke outcomes. If options are provided, the clear result would be a patchwork of competing systems and rampant incidence of double, or multiple, taxation.
- It must achieve certainty for businesses and administrability for governments. Policymakers must have an eye towards effective implementation and compliance. Some of the ideas under consideration would mandate the development of complex compliance systems for governments and businesses alike. Every effort must be made to avoid adding unnecessary complexity to the system. We believe simplified filing systems, including a one-stop-shop (OSS), combined with strong and dependable dispute prevention and settlement mechanisms, are essential components to the final outcome.