WASHINGTON – In comments to the Organisation for Economic Co-operation and Development (OECD) filed today, ITI reiterated its support for a multilateral solution to challenges caused by digitalization. In its response to the OECD’s Public Consultation on Global Anti-Base Erosion Proposal (GLoBE) (Pillar 2), ITI also warned of the risks of double taxation. The Pillar 2 consultation was released in November.
“Once again, ITI reiterates its support for the OECD as the optimal venue to contemplate reforms to the international tax system,” ITI wrote. “As you move towards a unified, comprehensive framework, we ask that you explicitly clarify how the distinct workflows will merge to create a coherent system. As a starting point to achieving coherence, ITI believes any calculations that result from Pillar 2 should occur after reallocations that result from Pillar 1. . . . Overall, companies should not be subject to multiple forms of taxation on the same income.”
In its Pillar 2 comments and building off its submission to the Pillar 1 consultation, ITI encouraged the OECD to explicitly clarify how the distinct workflows will merge to create a coherent system. ITI also noted at the outset that many jurisdictions have moved quickly to pass Base Erosion and Profit-Shifting (BEPS) reforms into law. BEPS reforms, including minimum tax regimes like the U.S. Global Intangible Low-Taxed Income (GILTI), need to be factored into the current workflow, particularly in regard to Pillar 2. Overall, the OECD should work to ensure companies are not subject to multiple forms of taxation on the same income.
ITI outlined key elements that should be considered in designing a minimum tax regime as outlined in the proposal:
- Use of financial accounts. The GLoBE should be based on world-wide consolidated financial statements and that the OECD should accept all acceptable standards regularly used by security regulators.
- Blending. A worldwide blending approach that includes all income- both foreign and domestic- should be adopted. Without worldwide blending, it would be difficult and costly to accurately determine the correct tax base.
- Carve-outs. Overall, the GLoBE provisions should only apply to those companies above the country-by-country reporting threshold. ITI believes the OECD should contemplate an exemption for companies that report a reasonably high global effective tax rate and set that rate as anything in excess of the minimum rate under the GLoBE regime. As suggested above, GILTI should be ‘white-listed’ and considered an appropriate income inclusion rule.