INTHEBLACK September 2021 - Magazine - Page 8
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// C PA A U S T R A L I A P O L I C Y
AT A G L A N C E
SEPTEMBER
UPDATE
Elinor Kasapidis,
senior manager tax
policy, CPA Australia
A detailed plan for
implementation of
a new solution for
corporate taxes is
to be finalised by
October this year.
Part of the new solution
includes a simplification
and streamlining of
baseline marketing and
distribution activities and
the removal of all digital
services taxes.
Implementation could
provide opportunities
to address existing
difficulties in the
resolution of crossborder tax disputes.
TWO-PILLAR
PROGRESS
THE OECD/G20 INCLUSIVE FRAMEWORK HAS RECENTLY MADE PROGRESS
TOWARDS ADDRESSING THE TAX CHALLENGES ASSOCIATED WITH
DIGITALISATION, WITH MORE THAN 130 JURISDICTIONS COMMITTING
TO A JOINT SOLUTION ON CORPORATE TAXES.
T
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8 ITB September 2021
he OECD/G20 Inclusive Framework on base
erosion and profit shifting (BEPS) is undertaking
work to address the tax challenges raised by
digitalisation. As of July 2021, more than
130 Inclusive Framework member jurisdictions have
committed to a two-pillar solution, with a detailed
implementation plan to be finalised by October 2021.
According to the statement by the Organisation for
Economic Co-operation and Development (OECD),
under Pillar One, the largest profitable multinational
enterprises (MNEs) will have a percentage of their
residual profit allocated to the market jurisdictions
where their goods and services are used or consumed.
This will make those profits subject to tax in the market
jurisdiction. However, enterprises operating in
extractive and regulated financial services industries
will be excluded.
Further, there will be a simplification and streamlining
of baseline marketing and distribution activities, as well
as the removal of all digital services taxes and other
similar and relevant measures.
Pillar Two comprises the Global Anti-Base Erosion
(GloBE) rules and a Subject to Tax Rule (STTR). The
GloBE rules will impose a top-up tax on a parent entity,
where its constituent entities are taxed at a low rate
(the Income Inclusion Rule) and will deny deductions
or require adjustments in relation to the low tax income
that is not subject to the top-up tax (the Undertaxed
Payment Rule). The STTR will allow source jurisdictions
to impose tax on certain related party payments that
are taxed below a minimum rate via treaties.
The GloBE rules will apply to MNEs meeting the
country-by-country reporting thresholds and impose
a top-up tax based on the effective tax rate test in each
jurisdiction. The minimum effective tax rate will be at
least 15 per cent.
A UNIFIED APPROACH
The OECD estimates that taxing rights on over
US$100 billion (A$136 billion) of profits will be
reallocated to market jurisdictions, while the global
minimum tax will generate an additional US$150 billion
(A$203 billion) each year. In addition, the OECD states
that the replacement of unilateral and uncoordinated
tax measures with a unified approach provides greater
tax certainty and a reduction in compliance and
administration costs, leading to a more favourable
global investment environment.