The Allocation of Taxing Rights under Pillar One of the OECD Proposal

OUP Handbook of International Tax Law (F. Haase, G. Kofler eds., Oxford University Press 2021 Forthcoming)

19 Pages Posted: 19 Apr 2021 Last revised: 11 Nov 2021

See all articles by Aitor Navarro

Aitor Navarro

Max Planck Institute for Tax Law and Public Finance

Date Written: November 9, 2021

Abstract

Pillar One is a proposal by the OECD Secretariat to address changes in the allocation of taxing rights of business profits at an international level. It comes as a reaction to the tension generated by the inadequacies of the international tax regime that are significantly exacerbated by the digitalization of the economy. The proposal aims at achieving a long-standing, consensus-based solution. Notably, the rationale of Pillar One is in opposition to long-standing standards on the allocation of taxing rights of business profits, such as the requirement of physical presence to allow source taxation or the arm’s length standard as a profit allocation mechanism. This contribution addresses Pillar One and its compromise-based rationale from a normative standpoint, and its feasibility in reshaping the future of the international tax regime.

The present draft was completed on November 9th, 2021 and incorporates the components of the 2021 October Agreement reached by 137 jurisdictions.

Keywords: Pillar One, OECD, Inclusive Framework, digital economy, international taxation

JEL Classification: H20, H87, F23, K33, K34

Suggested Citation

Navarro, Aitor, The Allocation of Taxing Rights under Pillar One of the OECD Proposal (November 9, 2021). OUP Handbook of International Tax Law (F. Haase, G. Kofler eds., Oxford University Press 2021 Forthcoming), Available at SSRN: https://ssrn.com/abstract=3825612 or http://dx.doi.org/10.2139/ssrn.3825612

Aitor Navarro (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz, 1
Munich, Bayern 80539
Germany

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