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Negotiations Continue on Pillar One

July 26, 2022

tp in 5 social pillar 1

Pillar One Negotiations: TP in 5

If you’ve been following negotiations surrounding the OECD’s global tax deal, then you know that the implementation of Pillar One has been pushed back to signing ceremony in mid-2023 with a possible roll-out in 2024.

Pillar One, of course, would reallocate a portion of profits earned by the largest multinationals to where they earn revenue (as opposed to where they have headquarters, as things stand now).

Why the Delay?

Countries still have a lot to negotiate—namely details surrounding withholding taxes and a marketing and distribution safe harbor.

The safe harbor limits how much profit can be reallocated to countries already taxing profits from certain functions. And there’s still debate over countries that apply withholding taxes—should Amount A’s reallocation be reduced as a result?

That’s a particular concern for developing countries that earn significant revenue from withholding taxes. In fact, at a G20 meeting earlier this month, India’s finance minister Nirmala Sitharaman lobbied for a broad subject to tax rule, which would allow developing countries to capture more revenue in countries with low withholding tax rates.

It’s enough to make you wonder if one delay is going to be enough.