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
Date Written: November 9, 2021
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: Suggested Citation