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IFA 2022: Global tax leaders eager to adopt pillar two

Viersen, Germany - January 9. 2022: Closeup of mobile phone with

World tax leaders and departing OECD director Pascal Saint-Amans said they would work increasingly hard to implement pillar two, during the IFA Congress.

Country officials and the OECD’s departing tax director said during the IFA Congress in Berlin that they remain optimistic that jurisdictions will adopt pillar two, despite hurdles in the tax framework.

“There is a misreading of the logic of pillar two and how it goes. But we have some countries implementing the change,” said Pascal Saint-Amans, director of the Centre for Tax Policy and Administration at the OECD, referring to Switzerland’s latest pillar two consultation.

“We might have some small hiccups, but the logic is extremely strong,” added Saint-Amans during the panel, on September 7. He will leave his role by the end of October, as ITR previously reported.

Countries including Germany have shown a strong appetite for adopting pillar two, which demands large multinationals within the country-by-country reporting scope to be taxed at a minimum tax rate of 15%.

On September 4, Sven Giegold, state secretary in the Federal Ministry for Economic Affairs and Climate Action in Germany, said the country must make progress on the implementation of the global minimum tax.

Giegold said in a tweet that they were acting on their own to “ultimately enforce European law”.

At IFA, Saint-Amans said he is confident that countries pushing for the implementation of pillar two will generate a “domino effect” and potentially enable a global consensus around the OECD tax framework.

“The pillar two logic is unlike transparency where you need everybody here – it’s enough to have a first mover, which is significant enough in terms of the size of multinational enterprises,” he said.

From Singapore to France

Huey Min Chia-Tern, deputy commissioner at the Inland Revenue Authority of Singapore, said that businesses operating in the country consider the rules too complex and the timeline too ambitious, but the jurisdiction will work “harder than ever” to adopt pillar two.

In the same panel, Gaël Perraud, director of European and international taxation at the tax policy department of the French Ministry of Economy and Finance, stressed the need for fiscal consolidation due to the harmful elements of excessive tax competition.

“It’s important to set a frame for this tax competition,” he said, referring to other tax regimes.

Countries must adopt the same set of rules for coordination to be established – a “key element” of the OECD project, according to Perraud.

France has already started the implementation work, as it has agreed on the model rules and started the process in the EU.

“It’s going so fast – it’s a major achievement. We will do it,” said Perraud.

Although the endorsement of pillar two may be underway in some countries, a global consensus remains to be seen as some nations, including the US, are still reluctant to adopt the OECD project.

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