4 Lingering Questions About Tax Certainty Under Global Rules

4 Lingering Questions About Tax Certainty Under Global Rules

July 6, 2022, Law360

Kevin Otero spoke with Law360 about the emerging disagreements with respect to the proposed two-pronged global corporate tax rewrite. In the Pillar One deal, countries have agreed to eliminate digital services taxes in exchange for new profit reallocation rules.

According to Kevin, there is a view in the business community that Pillar One should not only give companies certainty with a broad range of transfer pricing issues, but also certainty that businesses wouldn't face unilateral digital services taxes. A lot of companies would rather not have the "potential chaos" of those measures, he said.

While the U.S. believes the OECD model treaty would be helpful because it could give countries a chance to have a binding resolution on a broader scope of issues, Kevin cited a drawback to the approach. Arguably, Kevin said, it would be difficult to look at articles of the model treaty somewhat in isolation, rather than in the context of a complex and heavily negotiated bilateral treaty.

Kevin mentioned that one of the key issues for companies is confidentiality and the protection of business information. According to Kevin, there is concern about the appearance of potential conflict if panels are composed of independent experts who are advising companies in the private sector and have access to certain competitive information.

"There's at least the thought that it may be better to entrust government officials, who are more used to handling that information," Kevin said. He added that while the proposals outline confidentiality procedures, government officials may also be bound by certain laws "to protect taxpayer information and ensure taxpayer confidentiality."

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