The Taxation of Tomorrow

Download or read book The Taxation of Tomorrow written by Stefano Pesiri and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is devoted to an analysis of the recently promoted OECD/G20 reform and its potential effects on international taxation. Over the years, the efforts that the OECD and the European Commission had directed towards the development of an efficient international taxation system have been thwarted by the innovative techniques of economic operators. In particular, multinational enterprise groups (MNEs) became the beating heart of the problems plaguing international taxation. They were responsible for the use of increasingly articulated corporate structures that, by locating companies in low-tax territories, allowed groups to minimise the tax burden on them; equally elaborate were the transfer pricing techniques used: these are operations aimed at manipulating the prices of intra-group transactions, maximising or minimising costs as needed, so as to be able to shift profits from one jurisdiction to another. The conduct of the MNEs has been accompanied by the parallel behaviour of States, engaged in unbridled tax competition with each other through the offer of minimum tax rates, exemptions and generous tax incentives, with the specific intent of inducing as many investors as possible to locate in their territories, so as to broaden the tax base with which to finance public spending and tax revenues. The basis for making all this possible has been the spread of globalisation and the advent of digitalisation: two phenomena that have enabled companies to supply their goods/services from any where in the world, irrespective of any concept linked to the physical presence of the company in the territory of the state. In the light of all these phenomena, the international tax system, which was instead strongly anchored to the concept of physical presence (with the permanent establishment being the cornerstone of the OECD Model Convention), had entered a deep crisis. To emerge from it, a global reform was urgently needed. After years of negotiations, which began with the BEPS project, the current agreement was reached in October 2021, containing a reform proposal that, with the support of as many as 137 States, is set to revolutionise the world of international taxation, imposing a floor on tax competition and neutralising much of the profit shifting practices. This will be done through a project with two Pillars, which will have the task of responding to needs felt on several sides: on the one hand, Pillar One, with the introduction of the Nexus, will make it possible to identify the so-called “significant digital presence” and a fairer redistribution of wealth to be taxed in the various states; on the other hand, Pillar Two, through two interconnected rules, the IIR and the UTPR (to which will be added a third rule to be included in bilateral treaties, the STTR), will allow a floor to be imposed on tax competition and will ensure that companies falling under the scope of the new legislation will be required to pay a “fair share of taxes”, regardless of where they are located. What will emerge from this reform will therefore be a new system, fairer and more equitable, and above all capable of bringing international taxation (finally) into the 21st century.