Pillar 1 Could Boost Yearly Global Tax Revenues By Up To $32 Billion, OECD Says
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The OECD-brokered global tax reform mainly aims to reallocate taxing rights from low-tax jurisdictions to market jurisdictions, but it could also raise tax revenues around the world, an OECD official said Monday.
The two-pillar reform that 138 jurisdictions approved in July aims to reshape the global tax framework to ensure the world’s biggest companies pay more tax in jurisdictions where they make sales revenues.
Pillar one’s Amount A mechanism mainly reallocates rights to tax giant multinationals from investment hubs, where multinationals park large amounts of their profits, to market jurisdictions, where the companies make most of their sales revenues.
Around 70% of surrendered taxing rights will shift from low-tax investment hubs to market jurisdictions, said David Bradbury, deputy director of the Organization for Economic Cooperation and Development’s Center for Tax Policy and Administration.
Shift From Low-Tax to Higher Tax Jurisdictions
However, even though this shift is “zero sum” in terms of the existing tax base, it’s projected to add an extra $17 billion to $32 billion in revenues per year, globally, based on 2021 data. “That is because of this reallocation from what are typically lower-tax jurisdictions to relatively higher tax jurisdictions,” said Bradbury.
All jurisdictions—except the investment hubs—are forecast to see revenue gains, on average, as a share of their current corporate income tax. Smaller and low-income jurisdictions are forecast to get the biggest boosts, he said.
Bradbury commented during the organization’s latest video update of its tax policy work. He said the data, drawn from the OECD’s recent update on the economic impact of pillar one, are “subject to caveat.” (OECD.org)
US Risks Losing Tax Revenues to Pillar Two, Paper Says
The United States will lose significant amounts of corporate tax revenues to foreign jurisdictions if it does not update its tax code to comply with treatment of tax credits under pillar two of the OECD tax reform. That’s according to a paper published by the University of Pennsylvan’s Wharton School of Business (Wharton.Upenn.edu)
Microsoft Corp. set itself up for the $29 billion IRS tax adjustment the company recently announced by attempting to shift profits to Puerto Rico, ProPublica reported. (ProPublica)
Baker McKenzie fired a Hong Kong tax lawyer it hired months ago as a disputes counsel, after learning that he’d been accused of sexual misconduct at his former firm. (Roll on Friday)
Promotion
KMPG named US national managing principal for tax, Rema Serafi, to become its new firmwide vice chair of tax on Nov. 15. Serafi will be the first woman to hold that role at the firm, where’s she’s been for 27 years. (CFO Dive)