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The OECD's Radical New Global Tax Pacts Triggered by the Digitalization of Transactions

Pamela Ann Fuller, James Lee, Roberta An Chang, John P MacMaster, and SOYUN PARK

Despite many political obstacles, 137 OECD/G20 countries are now seriously contemplating, or taking steps to codify, in their respective jurisdictions, the two recent landmark multilateral OECD pacts—known as “Pillar One” and “Pillar Two.”  These global tax pacts are the most fundamental change in internationally agreed taxing rights in the last 100 years.  Pillar One, once implemented, will alter how the right to impose tax on huge profits of large Digital Platform Companies (DPCs) like Facebook, Amazon, and X will be divided up between: (a) countries where the DPCs are organized/managed, and (b) countries where the DPCs app customers are located—giving more taxing rights to the latter even though the DPC may not have any physical presence there.  Pillar Two--already being codified in some countries like South Korea—requires countries to impose a minimum threshold of tax--15%--on large DPC profits (to reduce economic distortions created by low or no-tax havens).  The panel will first provide a nuts-and-bolts overview of the two OECD Pillars, and then discuss the practical, structuring, and long-term policy implications of this massive change in taxing rights.  Panelists will also point out what advisors should be doing now to prepare their clients.

This panel was presented at the Fall 2023 Asia/Pacific Conference on “Law and Technology in a Changing World” in Seoul, South Korea.