Finance Ministers of the G7 have officially voted to support the OECD’s proposed new rules for the taxation of multinational conglomerates and businesses, using revisions of existing fund allocation and relationship rules, as well as using new global minimum tax regulations.
The G7 meeting took place at Chantilly in France earlier this year whereby the UK, the US, Japan, France, Canada, Germany and Italy all sat down to discuss the global differences between the OECD’s inclusive framework initiative for taxation reforms, aiming to bridge the gap between the marketing intangibles proposal being promoted by the US and the user participation proposal favoured by European countries such as France and the UK.
The differing opinions are a result of the reforms being pertinent chiefly to highly digitalised business models: often meaning US-based online companies. The ultimate proposal announced by the G7 reflects agreement to move forward with a modified version of both the EU and US version OECD’s international tax and transfer pricing reforms, with a workable solution to be adopted by January 2020.
It was agreed that the OECD will continue to work on a method whereby the new taxing rights (the EU profit allocation revision and nexus rules), would be resolved based on the level of a business’ participation in its clients relevant jurisdiction ‘such as valuable intangibles or employment of a highly digitalised model’.
A vital share of the approach will be a robust and effective tax dispute resolution through compulsory arbitration in order to maintain confidence in the system and avoid undoing years of double taxation agreements.
Following the meeting, reports released a list of countries that would be most likely to lose corporation tax revenue as a result of the G20 and OECD reforms:
the Scandinavian nations.