The Organization for Economic Cooperation and Development should go back to the drawing board on a key component in the new international framework for transfer pricing, the OECD’s business advisory group said.
In a Monday press release, BIAC said more work is needed on so-called Amount B, a component in the OECD’s global agreement to simplify transfer pricing. Some 138 OECD and non-OECD jurisdictions have approved that deal, but its details are still being fleshed out.
The agreement stands on two “pillars.” Pillar One is an excess-profits tax that targets mainly technology and pharmaceutical companies. Pillar two imposes a 15% minimum effective global tax rate on global companies.
According to the OECD, Amount A updates the international taxation framework for large and very profitable multinational enterprises. Amount B, part of Pillar One, focuses on the application of transfer pricing rules to so called baseline marketing and distribution activities.
BIAC said a “well-constructed” proposal for a Pillar One Amount B could produce significant benefits for both taxpayers and tax administrations.
But it said several Amount B details need clarification, such as its scope, how it will work as a safe harbor, and transfer pricing approaches to applying it.
BIAC suggested using the OECD multilateral convention to ensure Amount B is consistently implemented by jurisdictions.
“As a number of potentially material areas remain under discussion, we would also request another opportunity for the business community to comment on the design of Amount B before it is finalized,” BIAC’s tax committee chair, Alain McLean said in the statement.
