What could be the final public consultation meeting on the BEPS 2.0 blueprints will be held this week on 14 and 15 January 2021. The blueprints, which were published in October 2020, detail the technical rules of the proposed global corporate tax reform. If adopted, the proposed measures will result in fundamental changes to international tax rules that have been in place since the 1920s.
An ambitious timeframe of reaching agreement by mid-2021 has been set. Positive soundings are coming from Europe as regards achieving that agreement – the proposed BEPS 2.0 plans having strong support from the major EU member states. The German finance minister, Olaf Scholz, indicated at a Reuters conference in Berlin on 12 January that he is hopeful of a deal being reached with the new US administration on the proposed plan.
Opposition from the US, in particular in relation to the proposed Pillar 1 rules, is one of the main reasons why progress slowed in 2020 on reaching agreement on the BEPS 2.0 plans. The US stopped talks in June 2020, with the US Treasury Secretary, Steve Mnuchin, saying that the talks had reached an impasse. The Trump administration was looking for various changes to be made to the Pillar 1 proposals – Pillar 1 being the plan to change profit allocation and nexus rules that would allow market jurisdictions tax residual profits of certain multinationals.
The BEPS 2.0 proposals look set to be one of the first key economic challenges of the Biden administration. While countries wait to see if the new US administration will be more accommodating than the Trump administration, various countries are pressing ahead with introducing their own domestic measures to tax mostly US multinationals by way of revenue based digital services taxes. The US has responded by opening trade investigations by the US trade representative office to determine if retaliatory action is required. So far, the investigation into the French measure has concluded. While a 25% tariff on certain French goods from the start of this year was proposed, the US trade representative office said last week that it would suspend the French tariffs and instead deal with them together with any tariffs proposed from the investigations in other countries' digital services taxes. Separate investigations launched by the US trade representative office in June 2020 into the unilateral digital service tax measures adopted in countries such as the UK, India, Spain and Italy remain ongoing.