Source · Select Committees · Public Accounts Committee
Recommendation 3
3
Acknowledged
There are obvious challenges facing the OECD in implementing the multilateral Pillar One reforms to...
Recommendation
There are obvious challenges facing the OECD in implementing the multilateral Pillar One reforms to the planned timetable, which could have major implications for the future of the Digital Services Tax. Some other countries, including France for example, have also introduced new taxes similar to the UK’s Digital Services Tax, though they have varying scopes and tax rates. The introduction of such taxes reflects a wider desire for change and is a useful way of keeping up the pressure to introduce the OECD reforms. The timetable for implementation of the OECD reforms has already slipped once since the OECD announced agreement on the framework for the two-Pillar solution in October 2021. The OECD’s current timetable is for a multilateral convention signed by 140 tax jurisdictions in mid-2023, leading to implementation of Pillar One in 2024. This looks challenging and the ability to get key players on board is crucial. HMRC has not yet produced an estimate of revenue to the UK from Pillar One, telling us that too much is still uncertain about the new 6 The Digital Services Tax arrangements. HMRC says that the Office of Budget Responsibility’s estimate for annual revenues of £2 billion through Pillar Two is in line with high-level estimates from OECD. Recommendation 3: HMRC should update Parliament, within three months of international agreement on implementation of Pillar One, on progress with the implementation of the reforms.
Government Response Summary
The government agrees and reiterates the target implementation date is 2024, describing Amount A of Pillar One and stating that Parliament will be able to scrutinise and ratify the convention through normal Parliamentary procedures before Amount A of Pillar One is implemented.
Government Response
Acknowledged
HM Government
Acknowledged
The government agrees with the Committee’s recommendation. Target implementation date: 2024 3.2 Amount A of Pillar One reallocates taxing rights over 25% of profits in excess of a 10% profit margin of multinational businesses with global revenue greater than €20 billion, from the jurisdictions in which valuable activities are undertaken to the jurisdictions where customers are located. Amount B of Pillar One seeks to simplify and streamline the application of the arm’s length principle to baseline marketing and distribution activities with a view to addressing the needs of low-capacity jurisdictions and reducing the potential for disputes between tax administrations and taxpayers. 3.3 The aim is for the design of Pillar One rules to be finalised in 2023. Amount A will then only come into effect globally after a critical mass of jurisdictions signs and ratifies the multilateral convention. Countries would be required under the convention to remove DSTs once Amount A has come into effect. 3.4 After the multilateral convention has been agreed, Parliament will be able to scrutinise and ratify the convention through normal Parliamentary procedures before Amount A of Pillar One is implemented.