OECD/G20 Inclusive Framework on Base Erosion and ProfitShifting (BEPS) Statement on the Two-Pillar Solution to Address the TaxChallenges Arising from the Digitalisation of the Economy
FREQUENTLY ASKED QUESTIONS
来源：OECD 官网 日期：2021年10月8日 翻译：思迈特财税国际税收服务团队
1.How will the Two-Pillar Solution make surethat MNEs pay their fair share of tax?
Each pillaraddresses a different gap in the existing rules that allow MNEs to avoid payingtaxes. First, Pillar One applies to about 100 of the biggest and mostprofitable MNEs and re-allocates part of their profit to the countries wherethey sell their products and provide their services, where their consumers are.Without this rule, these companies can earn significant profits in a marketwithout paying much tax there. Under Pillar Two, a much larger group of MNEs(any company with over EUR 750 million of annual revenue) would now be subjectto a global minimum corporate tax. With the new rules, companies organisingtheir affairs in a way that their profits in a given jurisdiction (whether in alow-tax jurisdiction or otherwise) are subject to an effective tax rate lowerthan the minimum rate, those profits would still be taxed at a minimum rate of15%.
2.In July 2021, Inclusive Framework membersagreed a Statement on how to address these issues. What are the main changes inthe Two-Pillar Solution finalised in October?
The Statementadopted in July 2021 was a major achievement in that 134 countries andjurisdictions agreed on the framework for a Two-Pillar Solution to the TaxChallenges Arising from Digitalisation. The framework left certain keyparameters for decision by October. For example, the amount of residual profitto be re-allocated to market jurisdictions under Pillar One was left open buthas now been agreed as 25%. The rate of the minimum tax under Pillar Two hasnow also been agreed at 15%, whereas in July the level remained open to a rateof “at least 15%”. There were other thresholds and rates that needed to befinalised, as well as how to ensure tax certainty. In addition, a detailed implementationplan has now been agreed to help ensure that the ambitious timelines forimplementation can be met.
3.Does this only apply to around 100 companies?What about the other multinational companies: shouldn’t they pay tax, too?
First, all taxpayersshould pay their fair share of tax and the BEPS Project as a whole aims atmaking sure this is the case for MNEs. While it is true that the re-allocationof profit under Pillar One applies to about 100 companies, these are thelargest and most profitable companies, and expanding the scope of this rule tobring more companies in would not necessarily increase the amount ofre-allocated profit significantly but would add complexity. Nevertheless, thereis a provision to expand the scope after 7 years once there is experience withimplementation.
Pillar One alsoincludes a commitment to develop simplified, streamlined approaches to theapplication of transfer pricing rules to certain arrangements, with aparticular focus on the needs of low capacity countries, which are very oftenthe subject of tax disputes.
Pillar Two’s goal isto ensure that a much broader range of MNEs (those with a turnover of at leastEUR 750M, which will be hundreds of companies) pay a minimum level of tax,while preserving the ability of all companies to innovate and be competitive.For other, smaller companies, the existing rules continue to apply and theInclusive Framework has a number of other international tax standards like theBEPS actions, to reduce the risks of tax avoidance and ensure that they paytheir fair share.
4.How much tax are we talking about?
With the Two-PillarSolution, all types of economies – developing, emerging or with a higher GDP –will benefit from extra tax revenues. Under Pillar One, taxing rights on morethan USD 125 billion of profit are expected to be reallocated to marketjurisdictions each year. With respect to Pillar Two, the global minimum tax of15% is estimated to generate around USD 150 billion in additional global taxrevenues annually. These extra revenues will be particularly welcome, asgovernments need to fund the COVID-19 recovery.
5.What do developing countries get out of thisdeal?
The Two-PillarSolution acknowledges the calls from developing countries for more mechanical,predictable rules, and more generally, provides a redistribution of taxingrights to market jurisdictions based on where sales and users are located –often in developing countries. It also provides for a global minimum tax, whichwill help put an end to tax havens, lessen the incentive for MNEs to shiftprofits out of developing countries, and reduce pressure on developing countrygovernments to offer wasteful tax incentives and tax holidays, while providinga carve-out for low- taxed activities that have real substance. This means thatdeveloping countries could still offer effective incentives that attractgenuine, substantive foreign direct investment. Importantly, thismultilaterally agreed solution avoids the risk of retaliatory trade sanctionsthat could result from unilateral approaches such as digital services taxes.
Developing countries(particularly those in Africa, and with the support of the African Tax AdministrationForum (ATAF)) have had a significant influence on the agreement. For example,on Pillar One, the agreement includes a commitment to reduce the scopethreshold in 7 years (provided the system is operating as intended), which willresult in a bigger pool of profits to be reallocated to markets; the nexusthreshold – the point at which developing countries would see an allocationunder Pillar One from an in-scope MNE – is set at a low level (EUR 1 million,reduced to EUR 250 000 for the smallest countries) so as to maximise the numberof countries that will see revenue benefits; an elective option on taxcertainty which will help ensure that countries which have no or only verysmall numbers of disputes do not get tied up in mandatory dispute resolutionprocesses; Pillar One also includes a commitment to develop simplified,streamlined approaches, with a particular focus on the needs of low capacitycountries, to the application to transfer pricing rules to certain arrangementsthat are very often the subject of tax disputes and, under Pillar Two, theguaranteed availability of the Subject to tax rule (STTR). These elementscontributed to a balanced agreement for all parties in the negotiations.
Developing countrieswill gain revenue. Under Pillar One, which will see more than USD 125 billionof profit re-allocated to market jurisdictions, developing countries will standto gain more than developed countries as a share of corporate income tax (CIT).With a rate of 15%, the global minimum tax is expected to generate around USD150 billion in additional global tax revenues per year. In addition to this,developing countries are expected to gain further revenues under a treaty-based Subject to tax rule (STTR) which will allow countries to retain theirright to tax certain payments made to related parties abroad which often poseBEPS risks, such as interest and royalties. The subject to tax rule will bemade available to all developing countries.
6.Will developing countries get support in theimplementation phase?
The OECD has acomprehensive programme of capacity building support for developing countriesand has supported them consistently in their participation in the InclusiveFramework and in the implementation of the international tax standards sinceits inception. The Two-Pillar Solution is no different, and as the work turnstowards developing the rules and instruments needed to implement and then thejob of turning all that into law, then the OECD will be ready to supportdeveloping countries throughout this process. This support will be provided inclose co-operation with regional tax organisations such as the African TaxAdministration Forum (ATAF), the Inter- American Center of Tax Administrations(CIAT), the Intra-European Organisation of Tax Administrations (IOTA) and theStudy Group on Asian Tax Administration and Research (SGATAR), as well as keydevelopment partners through the Platform for Collaboration on Tax (PCT) and donorcountries that provide resources and expertise.
7.Will this be the end of profit-shifting byMNEs, via tax havens?
Yes. All countriesare sovereign and can set the tax policy of their choice, but harmful taxcompetition and aggressive tax planning need to end. Tax havens have thrivedover the years by offering secrecy (like bank secrecy) and shell companies(where the company doesn’t need to have any employees or activity in thejurisdiction) and no or low tax on profits booked there. The work of the G20and the OECD-hosted Global Forum on Transparency and Exchange of Informationfor Tax Purposes has ended bank secrecy (including leading to the automaticexchange of bank information) and the OECD Base Erosion and Profit Shifting(BEPS) Project requires companies to have a minimum level of substance to putan end to shell companies along with important transparency rules so that taxadministrations can apply their tax rules effectively. Pillar Two will nowensure that those companies pay a minimum effective tax rate of 15% on theirprofits booked there (subject to carve outs for real, substantial activities).The cumulative impact of these initiatives means that “tax havens” as peoplethink of them would no longer exist. Those jurisdictions that offerinternational financial services may continue to find a market for theirservices, but on the basis that they add real economic value for theircustomers and support for commercial transactions that are not tax-driven.
8.When will companies start paying this new tax?
The DetailedImplementation Plan provides for a clear and ambitious timeline to ensure aneffective implementation from 2023 onwards. On Pillar One, model rules fordomestic legislation will be developed by early 2022 and the new taxing rightin respect of re-allocated profit (Amount A) will be implemented through amultilateral convention with a view to allowing it to come into effect in 2023.Meanwhile, work will be developed on Amount B and the in-country baselinemarketing and distribution activities in scope, by the end of 2022. As forPillar Two, model rules to give effect to the minimum corporate tax will bedeveloped by November 2021, as well as the model treaty provision to implementthe subject to tax rule. A multilateral instrument will then be released bymid-2022 to facilitate the implementation of this rule in bilateral treaties.
9.If most countries have corporate tax rates ofmore than 20%, then why is the minimum tax set at 15%?
A large portion ofcorporate profit is subject to an effective tax rate lower than 15% - despitethe fact that the MNEs’ home jurisdiction has a stated corporate tax rate thatis much higher rate, so the compromise reached represents a major achievement.Remember also that the Two-Pillar Solution has been agreed by a large anddiverse group of Inclusive Framework members, many of which have corporate taxrates that are lower than 15%. While many members may have been happier with ahigher minimum rate, Pillar Two is the result of compromises on all sides.
10.Can’t countries just tax these companies ontheir own, like some have tried to do with “Digital Services Taxes”?
The two-pillarpackage provides for the standstill and removal of unilateral measures, such asDigital Services Taxes (DST) and other relevant similar measures. Countrieshave experimented with these taxes in the absence of a global solution agreedby all members, but always as a second- best approach. Inclusive Frameworkmembers understand that unilateral measures can be inefficient and lead todisputes with other countries – both because they may create double taxationand because they can lead to trade retaliation. The main targets of these DSTwere always the major digital companies, which would now be subject to the newtax in Pillar One. By negotiating together the standstill and removal of suchmeasures, the members of the Inclusive Framework recognised that a coordinatedapproach is more efficient than the proliferation of unilateral actions thatwould lead to more uncertainty for taxpayers, and to trade tensions betweengovernments.
11.How can the OECD guarantee that all thecountries joining the Two-Pillar Solution will actually implement it?
The Two-PillarSolution is the commitment of 136 out of 140 Inclusive Framework members, undera mandate from the G20. As with other international standards developed by theOECD, commitment comes with the obligation to implement and this implementationprocess will be monitored closely by the Inclusive Framework. The OECD trackrecord on this is excellent – implementation of tax transparency standards andthe BEPS package are prime examples – and securing a global level playing fieldhas always been the highest priority. The adoption of the DetailedImplementation Plan, which provides for a concrete and ambitious target dates,is the first important step to ensure that the agreed solution will beimplemented in practice.
12.The Two-Pillar Solution provides exclusions forthings like mining companies, shipping, regulated financial services andpension funds; why shouldn’t those kinds of companies pay their fair share?
The aim of theTwo-Pillar Solution is to make sure that MNEs can’t take advantage of the oldrules on international tax to avoid paying their fair share and the new rulesare designed to capture and address this problem. The exclusions provided forrelate to types of profit and activities that are not part of this problemeither because the profit is already tied to the place where it is earned (forexample, regulated financial services and mining companies will have to havetheir operations in the place where they earn their income) or the activitybenefits from different taxation regimes due to their specific nature (such asshipping companies and pension funds). These types of businesses are stillsubject to all the other international tax standards on transparency and BEPSto ensure that tax authorities can tax them effectively.