The Organisation for Economic Co-operation and Development (OECD) Steering Group for Tax Challenges of Digitalization issued draft progress reports to the delegates of the Inclusive Framework (IF) earlier this month.
The IF, which is comprised of 137 jurisdictions, is working toward a consensus solution to the tax challenges of digitalization. Discussions have focused on a two-pillar solution. Pillar 1 proposes a “unified approach” to revise taxing nexus and income allocation rules, while Pillar 2 proposes a global anti-base-erosion approach with a global minimum tax.
The Pillar 1 report acknowledges that full resolution has not been achieved, lists areas of agreement, and defines goals for the continued discussions. The Pillar 2 report agrees to the four components of the Global Anti-Base Erosion proposal –- income inclusion, an undertaxed payment rule, a switchover rule and a subject to tax rule. It does not address how U.S. GILTI rules would interact with the Pillar 2 treatment.
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