Tax and Technology

S. 149Elimination of Double Taxation with Respect to Amount A of Pillar One

Yan Ting Tan

S. 1501. Introduction

Digitalization has changed how businesses operate in a globalized economy. The ability to generate profits across borders, especially without any local physical presence in the market, puts pressure on the distribution of taxing rights under the current international tax system that was conceived in a largely “brick-and-mortar” economic setting. To stabilize the international tax system, Pillar One seeks to reallocate some taxing rights (known as Amount A) to market jurisdictions where goods or services are used or consumed. Falling within the scope of Pillar One are large and highly profitable multinational enterprise (MNE) groups identified as those with a global turnover above EUR 20 billion and with profits in excess of 10% of their revenue. These MNE groups are reckoned to be deriving residual profits for which the taxing rights over a portion (25%) is due to market jurisdictions under Pillar One.

Following the agreement on Pillar One reached by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting in October 2021, development of the operative rules for each building b...