Explaining how the narrative in the international taxing landscape has changed in the last decade, one of the panelists added that the fundamental purpose of the Double Tax Avoidance Agreement (DTAA) was to prevent payers from paying double taxes on the same income. Then comes BEPS 2.0, which will treat the entire MNC group as one entity and ensure a minimum level of taxation. The disadvantage of not having any such solution will be multiple unilateral measures and trade tensions that would inhibit investment in growth.
Mixed-bag global response to BEPS tax
Implementing the new global tax rules will give rise to a different attribution of tax revenue. According to an estimate by the OECD, Pillar One could see over US$100 billion reallocated to the market jurisdictions, while Pillar Two may help generate more than US$150 billion in new tax revenues globally.
As a result of increased tax certainty, the two-pillar package will lead to a better global environment for growth and investment, bringing benefits to tax administrators and payers.
Giving an overview of what is happening around the globe and how countries and companies are responding to the new tax rules, one of the panelists said that though a political agreement has been received from 137 countries, the framework still needs to be delivered on a country-by-country basis. There is likely to be a significant amount of policy change due to BEPS Pillar Two. From the EU perspective, the directive from the European Commission is likely to come by the end of December 2021. In the US, the package is pending Senate approval. The UK has adopted Pillar Two to get Pillar One.
Sharing an update on the interplay of new tax rules with the equalization levy and how we will look at the transition as we advance, Vijay Iyer said, “Most forms of equalization levy and unilateral measures will go away once Pillar One is implemented. Of course, all the relevant inland measures will be discussed.”
**The source of the data for the figures shown is taken from the recording of the panel discussion from the Tax Policy Roundtable conducted in Dec 2021, the data is as spoken by the panelists.