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Taxation of the digital economy—OECD Pillar One and Pillar Two update

Part of the Tax News & Views podcast series

The G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (the Inclusive Framework) released two detailed “blueprints” in relation to its ongoing work to address the tax challenges arising from the digitalization of the economy. The first Blueprint—technical progress on Pillar One’s revisions to rules for allocation of profits to market jurisdictions without regard to the arm’s length standard and nexus/permanent establishment. The second Blueprint—technical progress on Pillar Two’s proposed approach to establishing a global minimum tax and backstop regime that denies deductions or imposes withholding in cases of certain payments to low-tax jurisdictions.

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Tax podcast: Taxation of the digital economy—OECD Pillar One and Pillar Two update

November 4, 2020

The G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (the Inclusive Framework) released detailed “blueprints” for both Pillar One and Pillar Two in relation to its ongoing work to address the tax challenges arising from the digitalization of the economy.

These blueprints could fundamentally change long-standing rules governing international taxation of large, multinational entities. What should tax executives know?

On this episode, Bob Stack, managing director in Deloitte’s Washington National Tax—International Tax group, discusses the latest updates on the Pillar One and Pillar Two blueprints, the impact of the US presidential election, and the potential paths forward.

As of today, in the current drafts, there’s a fair amount of muddy waters around what are the principles that are driving the work, and also to see if they can get something simpler and more administrable. And to see if we can improve the certainty that US businesses will get out of this project, because after all, that’s what got US businesses to the table to begin with.

—Bob Stack

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