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How Will Amount A Disputes be Resolved?

7th June 2022

tp is 5 social image tax disputes

It’s hard enough to figure out how Pillar One will work if and when the plan goes smoothly. But figuring out all of the issues that could possibly arise—and how to resolve them—seems nearly impossible. Yet the tall order of Pillar One dispute resolution is in the hands of the OECD right now. Of course, Pillar One reallocates a portion of profits (Amount A), made by multinationals, to markets where companies have customers as opposed to where businesses are physically located. But what happens when countries don’t agree on how much should be allocated to each jurisdiction? Or, when taxpayers are facing double taxation? In an effort to answer that question as well as others, in May, the OECD opened a public consultation on dispute mechanisms surrounding Amount A. If governments aren’t able to agree on profit amounts, or other issues, then the OECD recommends determination panels step in efforts to resolve the disputes.  

Who makes up the determination panels? The OECD’s consultation document proposes three groups: one would be made up of government officials, the other independent experts, and the other, a mix of the two. However, according to Law360, the U.S. wants taxpayers to have a say, as well. U.S. officials would like the multilateral convention to include a provision stating that taxpayers can submit position papers to the determination panels. The OECD recommends that determination panels must choose a government position to resolve the issue. However, the Senate thinks that determination panels should be made up of only independent experts. The thinking is if governments fail to reach an agreement in the early stages of negotiations, why would they be able to reach one later on? How do taxpayers seem to feel about independent experts deciding the fate of billions of tax dollars earned by multinational companies?  A little uncomfortable, to say the least.