OECD reports on the Pillar 1 and Pillar 2 blueprints - BusinessEurope's reply to the public consultation

Key messages

• We believe that the blueprints demonstrate the significant and ambitious progress the OECD is making in reforming the international corporate tax system to address the tax challenges of the digitalised economy. While the blueprints will need to be thoroughly adapted in order to avoid excessive administrative burden on companies, we hope to see an agreement by the OECD-deadline. We urge all participants to cooperate closely by supporting the international negotiations. Proposing or implementing unilateral taxes would not be a well-founded way forward as this creates great uncertainty and, as demonstrated by the OECD impact assessment, unilateral measures have the potential to damage the economic recovery significantly.
• However, the current blueprints are deeply complex and, without extensive changes to the overall framework, they are likely to lead to significant administrative costs and decreasing levels of tax certainty for companies. In advance of any agreement, we strongly encourage the Inclusive Framework to explore and consider multiple simplification measures.
• We welcome the OECD’s impact assessment and we encourage the Inclusive Framework to take the OECD’s recognition into account that increases in the effective corporate tax rate (ETR) have a negative impact on growth and investment. Any significant increase in the ETR and compliance costs must be avoided, in particular as companies are now faced with high post-COVID-19 recovery costs and important innovation challenges in many policy areas.

What does BusinessEurope aim for?

• A global agreement on new profit-based international tax rules - which addresses harmful tax practices, eliminates double taxation and keeps administrative burdens to a minimum - will be most effective through a deep and harmonised implementation in a new Multilateral Instrument covering both Pillar 1 & Pillar 2.
• Countries should make a binding commitment to repeal existing or pending unilateral measures when a global agreement is found, as these would lead to increasing tax and trade disputes. Digital services taxes in particular, based on turnover, are “leading to higher prices, lower sales and less investment”, according to the OECD’s own impact assessment.