OECD publishes Pillar One convention

The OECD has released the text of a new multilateral convention to implement 'Amount A' of Pillar One. If ratified by sufficient jurisdictions (by no means a foregone conclusion) the convention will co-ordinate a reallocation of taxing rights for market jurisdictions over profits of the largest multinationals operating in their market irrespective of physical presence. It will also prohibit the imposition of new digital services taxes and require the removal of specified existing taxes.

Despite its publication, the convention is not yet open for signature pending the resolution of remaining differences. In particular, the OECD press release notes that there are 'different views on a handful of specific items … by a small number of jurisdictions', namely Brazil, Columbia and India.

For the convention to enter into force, it must be ratified by at least 30 jurisdictions accounting for at least 60% of the ultimate parent entities of in-scope multinationals. Assuming this threshold is met, the OECD predicts that taxing rights on about US$200 billion in profits will be reallocated to market jurisdictions each year, leading to annual global tax revenue gains of between US$17‑32 billion.