Taxing By Consensus
Kitty Miv, Editor
15 July, 2021
In last week's column, we discussed the OECD announcement that 130 (subsequently revised upwards to 131) countries and jurisdictions had signed up to an international agreement on an overhaul to tax rules for the digitalized economy and for large multinational businesses, and this, and other big-ticket events, have continued to dominate the news this week.
The OECD's announcement was not greeted with universal praise, with lower tax and smaller financial centers such as Liechtenstein observing that although a number of them had put their names to the tentative international accord, considerably more work is needed to meld the interests of different stakeholders into a blueprint that will secure international approval by the planned deadline of October.
The Government explained that: "Liechtenstein's position remains that everything must be done to find a global solution that does not interfere even more with the sovereignty of the individual states, does not hinder economic development, and leads to the lifting of unilateral measures. In particular, the positions of small and competitive countries must also be taken into account. Intensive work is still necessary to translate the global consensus into a globally implementable solution. The next meeting of the Inclusive Framework is scheduled for October 2021. Liechtenstein is coordinating intensively with various states that have similar interests."
Meeting on July 9-10, however, representatives of G20 countries expressed a broad sense of consensus on the proposals advanced by the OECD, the first pillar of which would determine where tax should be paid, with the second pillar setting a minimum global rate.
In a communique issued by the G20 following its meetings, the G20 countries stated that:
"After many years of discussions and building on the progress made last year, we have achieved a historic agreement on a more stable and fairer international tax architecture. We endorse the key components of the two pillars on the reallocation of profits of multinational enterprises and an effective global minimum tax as set out in the "Statement on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy" released by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on July 1."
There was more tax excitement to come later in the week, when it was announced that following meetings between the US Secretary of the Treasury, Janet Yellen, and representatives from the European Commission, the European Union would be placing its plans for the introduction of a new digital tax levy on hold.
Speaking following those meetings, a Commission spokesperson said shelving discussions at EU level on a new digital levy would allow the Commission to focus on ensuring support for the implementation of the framework outlined on July 1 by the OECD, which has now received the G20's support.
Finally, Caribbean territory Saint Vincent and the Grenadines, which had initially declined to sign up to the OECD's agreement, added its name to a statement in support of the proposed international tax overhaul, leaving just Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria and Sri Lanka as part of the BEPS Inclusive Framework, while remaining opposed to the proposals.
Until next week!
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