OECD initiative on international corporate taxation
Pillars One and Two are OECD’s response for a need to address international tax reform for digital economies across the globe.
Building on the base erosion and profit shifting (BEPS) initiative that culminated in widescale changes to corporate taxation across the globe, the Organisation for Economic Cooperation and Development’s (OECD) Secretariat continues to pursue broad far-reaching international tax reform.
Earlier in 2019, the OECD’s Secretariat issued a discussion document on the tax challenges of the digital economy with a unified approach (referred to as Pillar One). This document proposed new tax rules to alter the way profits are allocated to a jurisdiction in a multinational business, including those that are highly digital. This includes consideration of a new nexus rule, which could allocate profits to a jurisdiction where a business did not previously have a taxable presence under traditional rules (permanent establishment (PE) or nexus).