INTHEBLACK August 2022 - Magazine - Page 36
F E AT U R E
// TA X R E P O R T I N G
combined revenue of €750 million (A$1.1 billion)
or more. The rules do not require low-tax countries
to increase their corporate tax rates to 15 per cent,
although the changes may ultimately have that effect.
A top-up tax will be imposed on multinationals if
their effective tax rate on a jurisdictional basis is
below the Pillar 2 tax rate.
Negotiations on the two pillars of the Inclusive
Framework proposals have been proceeding in
parallel, but opposition has emerged on some
fronts. For example, Pillar 1 is facing criticism
from Republican senators in the US Congress,
and commentators claim the deal could fall over
if the Democrats lose control of the House of
Representatives in November’s midterm elections.
Alia Lum, tax policy lead at KPMG Australia, says
BEPS 2.0 is an important step towards providing a
more equitable allocation of taxing rights to market
36 ITB August 2022
jurisdictions under Pillar 1. “But it also tries to stop
the race to the bottom for corporate tax rates through
these global minimum tax proposals in Pillar 2, and
the OECD has done well to get 139 countries to
sign up to this because it’s a bit like herding cats,”
Lum says.
Lum believes the deal is already having an impact,
with a number of jurisdictions responding to the
proposals even though they are not yet fully in place.
“Some countries are already looking at reassessing
tax-incentive regimes and domestic minimum taxes,
and also raising corporate tax rates.”
According to Lum, countries with concessional
tax regimes such as Singapore and Hong Kong could,
in effect, be forced to raise some tax rates under the
new regime. For example, if an Australian company
had a subsidiary in Singapore operating under a
10 per cent concessional tax – remembering that the