A collection of the brief insights throughout August 2020 of the type provided on an ad hoc basis in our Latest digital tax byte update.
21 August 2020
The OECD promised to publish two blueprints, one on Pillar 1 and one on Pillar 2, in October 2020 and drafts have been circulated to Inclusive Framework countries (and have been leaked in some quarters). A public consultation on the two blueprints is expected around that time.
The publication of the blueprints will not ensure a political commitment of countries agreeing to implement both pillars. Within the Inclusive Framework, there are countries pushing for an agreement only on Pillar 2 in October 2020. An equal number of countries, including the UK, remain keen on reaching an agreement on both pillars. For them, Pillar 2 does not tackle the challenges of the taxation of the digital economy. It now looks like any political agreement is more likely to occur in the first half of next year, rather than later this year, although this is still unclear and the negotiation is difficult.
Many details of Pillar 1 have been ironed out. For example, the calculation of Amount A will start from an accounting measure of profit before tax. Also, there now seems to be very little discussion around Amount C (i.e., the additional return for entities performing more than basic marketing and distribution functions) and the related dispute resolution mechanisms. Some important issues still remain unresolved. These are covered below.