International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Global TP Forum Europe: Tax leaders demand ‘simplified’ pillar one

L to R: Andy Neuteleers, Vikram Chand, Sebastiaan de Buck, Mauro Faggion, Marta Pankiv, Jens Krüger

Tricentis and Boehringer Ingelheim, along with a European Commission TP specialist, criticised the complexity of pillar one rules and their scope at an ITR event.

The OECD’s pillar one-related transfer pricing rules remain too complex and the scope should be expanded, according to speakers at ITR’s Global TP Forum Europe, held in Amsterdam yesterday, September 28.

“We think it’s really important to have a simplification of the TP rules,” said Mauro Faggion, TP expert at the European Commission.

Faggion stressed that the need for simplification provided a “clear mandate” and that there is a “real demand” from businesses.

Other panellists including Vikram Chand, professor of law at the University of Lausanne in Switzerland, agreed with Faggion’s comments.

“A lot of people will agree that these rules are not simple to understand at this stage. The way the proposal has been set right now in the progress report looks complex,” he explained.

Failure to address the complexity of the rules could jeopardise the success of the OECD’s project, particularly if multinationals continue to show strong reluctance.

Jens Krüger, senior manager of TP at pharmaceutical company Boehringer Ingelheim in Germany, explained why the rules needed to be simplified.

“We need to have the data from our systems – to find where they are and compute Amount A and B. What we did is a list of pillar one and two and all the different definitions.

“Then we also did a list where we compared the definition of pillar two, which we might be able to use for pillar one,” said Krüger.

“Simplification for us would mean shortening this list. That would be my pledge for simplicity,” he added.

Size matters

However, the simplification of pillar one rules is not the only amendment that tax directors expect. Some also demand a wider scope that captures more corporations.

Under the current proposals, pillar one targets the large and most profitable companies. Those subject to the rule must have total revenues that exceed €20 billion ($19.2 billion) and their profitability measured against the total revenues must exceed 10%.

“Neutrality is also about ensuring that the system applies as broadly as possible,” said Chand. “From that point of view, you may say that a lot of multinational enterprises are not caught by these rules.”

But other corporations fear digital taxes already target companies that are not fully technology driven and that increasing the scope could also create more risk of double taxation.

Marta Pankiv, senior director and head of group tax at software company Tricentis in Vienna, said digital services tax (DST) remained “quite an issue”.

“Every time we are trying to figure out whether we can sell in a location, the first thing that pops up would be DST and VAT. When we talk about pillar one allocation – how about other businesses? DST is very broad,” she said.

“There are companies that are not necessarily all technology but are selling technology goods – the scope is very broad. It’s also double taxation for us,” added Pankiv.

In 2021, countries including France, the UK, Austria, Italy, Spain, and the US reached an agreement to implement the DST during the interim period of pillar one’s implementation.

These jurisdictions plan to offer tax credits once pillar one is adopted – an initiative that Pankiv has welcomed, but the limited number of countries continues to pose a risk for businesses.

“My hope is that countries are willing to be aware that it’s not about imposing tax and getting quick money. I hope there will be some compromise on the road,” she said.

more across site & bottom lb ros

More from across our site

Bartosz Doroszuk of MDDP offers insights on Poland’s new tax legislation on shifted profits, as the implementation deadline looms nearer.
Four tax specialists preview the UK’s transfer pricing requirements, which come into effect on April 1.
The rise of the QDMTT will likely change how countries compete on tax and transfer pricing policy, but it may not reverse decades of falling corporate tax rates.
ITR’s latest quarterly PDF is going live today, leading on the EU’s BEFIT initiative and wider tax reforms in the bloc.
COVID-19 and an overworked HMRC may have created the ‘perfect storm’ for reduced prosecutions, according to tax professionals.
Participants in the consultation on the UN secretary-general’s report into international tax cooperation are divided – some believe UN-led structures are the way forward, while others want to improve existing ones. Ralph Cunningham reports.
The German government unveils plans to implement pillar two, while EY is reportedly still divided over ‘Project Everest’.
With the M&A market booming, ITR has partnered with correspondents from firms around the globe to provide a guide to the deal structures being employed and tax authorities' responses.
Xing Hu, partner at Hui Ye Law Firm in Shanghai, looks at the implications of the US Uyghur Forced Labor Protection Act for TP comparability analysis of China.
Karl Berlin talks to Josh White about meeting the Fair Tax standard, the changing burden of country-by-country reporting, and how windfall taxes may hit renewable energy.