Businesses Complain New Global Minimum Tax Filing Rules Would Be Too Burdensome and Complex

On 16 February 2023, the OECD disclosed a number of comment letters it received in response to its December 2022 release of two documents for public consultation on GloBE information return (GIR) and Tax Certainty for GloBE rules. In response, 87 comments were received for tax certainty and 88 for GloBE rules.

With regard to GIR, the OECD sought public consultation seeking suggestions for how best to simplify calculations that may be developed as safe harbours, identify cases where the MNE group should not be required to collect all data points, and recognize circumstances where the data required may not be available or burdensome to collect, among other things.

In many of the GIR-related comments, respondents flagged as major concerns the complexity and the extent of the information required to be reported.

The Association of British Insurers wrote that "more than a hundred data points [are] required, many of which are broken down into additional categories required across jurisdictions and entities", which it said is too complex and detailed — a point raised by others, such as Unilever. One respondent in its submission, mentioned that not only would this be a compliance burden for taxpayers, but it would also be a challenge for "tax administrations to analyse all datapoints disclosed".

Companies such as Unilever recommended that, in the interest of taxpayers and tax authorities, "[the] level of disclosures in the return must be proportionate to the policy intent and the top up amounts at stake". Unilever wrote that it files returns in 100 countries, but top-up tax may be due in 10 countries or less and further lower where qualified domestic minimum top-up tax is applied.

Many, including the Irish Tax Institute, wrote that reporting is at a jurisdictional level and not at a level of constituent entity. Further, to achieve the simplification the QDMTT safe harbours received, the Standard Chartered Bank recommended the OECD review QDMTT regimes to prepare a "whitelist".

Many cited significant privacy concerns because the GIR carries granular information about a business. Unilever suggested "in no circumstance should a country have access to detailed CE-by-CE information for other countries if that country is not in a position to collect top up tax based on GloBE rules".

The other consultation document focused on the tax certainty aspects, such as the difference in the application of rules across jurisdictions and options available to achieve certainty.

Dispute prevention was considered important among respondents for the application of the Pillar Two rule. One respondent, in its submission, recommended a "high degree of consistency in implementation to avoid double (multiple) layers taxation".

The rule ordering of QDMTT, the Income Inclusion Rule and the Under Taxed Payments Rule were also underscored in the ICC's comments. Existing domestic laws may also interact with Pillar Two rules making it important to set up a dispute resolution mechanism that goes beyond the existing mechanism under tax treaties, it said.

Temasek suggested in its letter that "Inclusive Framework members implementing Pillar Two must correspondingly implement the binding dispute resolution mechanism in domestic jurisdictions" and that a determination panel for Amount A could conceivably resolve GloBE-related disputes. This would also require officials to be trained sufficiently so as to be able to provide timely certainty, it said.

Head of Corporate International Tax at MHA, Chris Denning, concludes “The reality of the requirement to do something in response to the introduction of these rules is now biting as many jurisdictions incorporate them into domestic law. The rules are undoubtedly complex and if not been done so already, multinationals should be pulling together a roadmap of actions to deal with implementation, including: modelling the impact on the effective tax rate, considering the accounting disclosure implications, looking at whether any group restructuring is required, considering what systems adaptations are needed for data analysis, and how to collect the date to enable the relevant filings to be made. Implementation is going to be an expensive and time-consuming exercise and no doubt, there are going to be a couple of years of pain in this regard!”

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Chris Denning, Head of Corporate International Tax: [email protected]
Chris Danes, Tax Partner: [email protected]

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