The Organisation for Economic Co-operation and Development Secretariat on 8 November, published Public consultation document: Global Anti-Base Erosion Proposal (‘GloBE’) (Pillar Two) which seeks stakeholders’ views on the introduction of common global minimum tax rules across the more than 130 countries participating in the OECD Inclusive Framework. Such rules would operate through top up taxes and other defensive measures where a multinational group’s income is not subject to sufficiently high levels of tax. Together, these rules are known as the GloBE proposal.
The Consultation is the second part of the OECD’s efforts to develop a two-pronged solution (alongside ‘Pillar 1’ Proposals, which seek to rewrite profit allocation rules for large ‘consumer facing’ businesses) to the tax challenges arising as a result of globalisation and digitalisation. Unlike the Pillar 1 proposals, however, this latest consultation envisions minimum tax rules that apply to large international businesses
in all sectors (subject to potential carve-outs) and could therefore significantly increase tax and compliance costs for an even wider range of businesses.
While this workstream is being delivered under the OECD’s “Tax Challenges Arising from the Digitalisation of the Economy” project, the impact of the proposals being implemented go far beyond highly digitalised businesses; these proposals seek to address more fundamental concerns that the BEPS Project did not provide an adequate solution to the risks of activities and profits being moved to low- (or no) tax jurisdictions. The potential impact should be heeded by all international businesses - including those who do not operate in low-tax jurisdictions and those already subject to US GILTI rules.
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