Avocado Roundup: OECD's New Global Treaty Shows Progress, But Not a Done Deal

Oct 12, 2023

The Organization for Economic Cooperation and Development yesterday released a core piece of its two-pillar plan for reforming the international tax framework to address challenges posed by globalization and digitalization of the economy. The Multilateral Convention to Implement Amount A of Pillar One aims to ensure giant tech companies and other major multinational enterprises pay tax where they do business. It would also improve tax certainty for business, and would repeal national digital service taxes, the organization said. (OECD.org)
The new MLI, the fruit of work by over 140 countries and jurisdictions, demonstrates “tangible” success of a decade of multilateral cooperation on tax matters, said Manal Corwin, head of the OECD Center for Tax Policy and Administration. But there are still technical disagreements between some jurisdictions to work out on the document, she said. (LinkedIn)
The new multilateral instrument “reflects the consensus achieved so far, but is not yet open to signature and changes could still be made,” law firm Baker McKenzie said in a client alert. Once signed, to go into force the treaty must be ratified by at least 30 jurisdictions including the headquarter jurisdictions of at least 60% of multinational enterprises currently expected to be within amount A’s scope, according to the note. (BakerMcKenzie.com)

The African Tax Administration Forum said African countries have for years had difficulties taxing “highly digitalized” businesses. Many ATAF members are concerned that technical disagreements over the multilateral instrument, and the complexity of its rules, will delay its signing and coming into force. That would cause “continued loss of revenue from non-taxation of the digital economy” by these countries, the forum said. (ATAFtax.org)
The OECD yesterday also released a new guide for tax policy makers in jurisdictions to implement Pillar Two global minimum tax rules. (OECD.org)

Microsoft Corp. said it received notices of proposed adjustments from the US Internal Revenue Service for $28.9 billion in back taxes plus penalties and interest. The company said it plans to contest the adjustment, which stems from a transfer pricing dispute for its tax years 2004 to 2013. (SEC.gov)
The UK accounting profession regulator, the Financial Reporting Council, announced a record 21 million pounds ($25.7 million) in sanctions against KPMG LLP for failures in its audit of government contracting company Carillion plc. That company, a UK-based multinational construction and facilities management services company, was liquidated in early 2018. (FRC.org)

Freshfields Bruckhaus Deringer said energy transition and infrastructure finance attorney Andreas Ruthemeyer will rejoin the firm in Frankfurt, Germany, as a partner in its global transactions practice. Ruthemeyer, an associate at Freshfields earlier in his career, arrives after four years at Clifford Chance, where he’s counsel. (Freshfields.com)

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