OECD Calls for a New Global Tax System

The OECD has set itself the goal of taking further steps to bring about a fair and equitable transformation of the global tax system within the framework of its new program, often referred to as BEPS 2.0, by developing two new tax concepts, referred to as pillars.

"The first pillar of the program would allow for the taxation of income from digital business models, but as we have reported on several occasions, a consensual design for this seems increasingly unattainable. This is largely due to the most active reviewer of the draft, the United States. citing the discriminatory nature of the digital tax, the U.S. had previously opposed and then wanted to make the new tax system under development optional," says an analysis by Deloitte Hungary.

In an open letter, U.S. Treasury Secretary Steven Mnuchin has recently called for the suspension of negotiations on digital taxation and foresees trade retaliation in the case of similar taxes to be introduced unilaterally. Nevertheless, in his letter, Mnuchin pointed out that the United States supports the second pillar of the OECD program, whose concept shows several similarities already in the US solutions for tax base erosion presented earlier.

The second pillar of the OECD’s new program, called 'The Global Anti-Base Erosion' (GloBE) proposal seeks to achieve the removal of an unfair tax advantage resulting from differences in national legislation and the benefits of bilateral tax conventions by imposing a pre-determined minimum tax burden.

“Under the proposal, provided a certain income tax burden would not reach the required minimum, the income would be subject to additional taxation either in the state of residence of the recipient of the income or in the source country of the income,” Ferenc Póczak, partner at Deloitte Hungary's tax department pointed out.