Flick Gocke Schaumburg, Taxand Germany, recently hosted a client seminar in Frankfurt to review with clients recent developments relating to the OECD’s suggested approaches on new profit allocation rules and minimum taxation, and the latest developments in international cooperation between local tax authorities and tax payers (ICAP and others). Taxand partners from the US, France, Italy, Spain, Austria, Switzerland, and the UK participated, bringing their different perspectives. Discussions were led by Marcus Mick, partner in the Frankfurt office of FGS, and by Nadia Altenburg, also of FGS and recently returned from an almost two year secondment to the OECD where she worked directly on many of the matters discussed.
Taxanders and our clients are intimately aware of the significant challenges that everyone involved in the international tax community, whether in the private sector or in the public sector, have been facing in recent years, since before the OECD and G20 launched the ambitious BEPS project. And notwithstanding the significant work of the OECD and G20 and more recently of the Inclusive Framework of over 130 countries, challenges remain for both taxpayers and governments.
One of the key aims of the OECD in its BEPS related work, and indeed of the OECD’s Centre for Tax Policy and Administration for many years before the launch of the BEPS project, has been to bring greater harmony amongst national tax policies to the benefit of both governments (by, amongst other things, protecting national tax bases from aggressive actions) and taxpayers (by, amongst other things, reducing the incidence of conflicting national tax policies and administration that can detrimentally impact taxpayers and by reducing complexity in tax planning and tax compliance). The publication on 9 October 2019 by the OECD Secretariat of its consultation document to present the current technical work on the “Unified Approach” is only the latest instalment in this never ending work.
The discussions amongst Taxanders and clients at the seminar highlighted a number of particular points, not the least of which is that if developed and pursued there remain many details to be addressed and expanded, including how and where to craft the lines amongst impacted businesses and how to precisely allocate taxing rights.
However, perhaps most dramatic is that both Pillar 1 and Pillar 2 would represent dramatic departures from some of the bedrocks of the existing international tax system such as the arm’s length principle and the separate entity treatment of corporations.
It remains to be seen how far and how fast these ideas will progress. In this regard, it is important to remember that the 9 October publication reflects the work of the OECD Secretariat only and is not, as yet, representative of a consensus amongst members of the Inclusive Framework.