The OECD/G20 invited comments from the public on the Pillar One Blueprint and Pillar Two Blueprint, which were both published on October 12th, 2020.
Pillar One is about allocating more taxing rights to market jurisdictions in respect of income derived from automated digital services and consumer facing businesses. It is achieved through a new jurisdictional nexus test and a new method of allocating a multinational enterprise group’s profit. This new nexus is largely based on the amount of sales, as opposed to the traditional permanent establishment test. The new profit allocating method is drastically different from the existing transfer pricing rules. To implement Pillar One, a new public international law instrument is proposed and “standardized” rules need to be transposed into domestic law.
Pillar Two aims at introducing a global minimum corporate tax on large multinational enterprises.
Osgoode Hall Law School's Professor Jinyan Li submitted her comments to the OECD on the legal challenges in implementing Pillar One. These comments were published by the OECD on December 16th, 2020, and can be accessed by clicking: here.
Additionally, all received comments published by the OECD can be accessed by clicking: here.
Interesting times we live in! Covid, sieges on the American Capitol by angry mobs induced by elected officials, tax system upheavals, times are truly dynamic.
I remember Professor Li making a comment which resonated with me, the issues of political consensus and of nations coming together to make these Blueprints successful
With increasing globalization, the national sovierignity of independent political states is increasingly becoming an opposing and unpredictability creating force in certain circumstances, such as on the int. tax stage
Already the United States is pushing for an optional or safe harbor approach when it comes to the blueprints, which is being resisted by other nations
A continuation of the first thought, standardizing the inclusion of the Blueprints may prove difficult at the individual nation level- let's take a look at Article 9's inclusion into Canadian domestic law via s 247. Although the aim was to bring Article 9 into domestic law, but looking at how the words have been interpreted by the Courts in Canada e.g., Cameco - in para 699 the Court states that the purpose of s 247(2) was to implement the arms length principle (which OECD article 9 is a codification of), the different words by Parliament are interpreted to be generating a different outcome than what the words of article 9 would have imagined (the meaning of article 9 illuminated by the 1995 Guidelines). I would not be surprised to see Canada and other nations take divergent ways of importing the blueprints into their domestic laws, which will lead to chaos and unpredictability without a uniform approach
It is the common issue at the root of international tax - the lack of a uniform governing body which has the political power to implement such modernization attempts uniformly across the globe. It isn't limited to international tax, I was having a chat with an old Professor of mine and he mentioned the issues with ease of incorporation in different jurisdictions. As Professor Li and Professor Wilkie put it, we now have the existence of another world - the digital realm. The digital realm can be used to generate corporate intermediaries in the actual physical world with the click of buttons, a separate but related and interesting conversation
One world government I suppose is the only solution, ha! Maybe the Knights Templar actually had it all figured out