OECD Releases Draft of Digital Tax... Public Hearing Begins

OECD Holds 'Digital Tax Written Public Hearing'

[Asia Economy Sejong=Reporter Lee Jun-hyung] The Organisation for Economic Co-operation and Development (OECD) has released draft reports related to Digital Tax Pillar 1 and 2. The OECD will also hold written public hearings to gather opinions from industry and experts.

The Ministry of Economy and Finance announced on the 23rd that the OECD Inclusive Framework (IF) has released draft reports on Digital Tax Pillar 1 and Pillar 2. The core of the Pillar 1 report is the 'prohibition of unilateral taxation by individual countries.' Through the Pillar 1 report, the OECD disclosed a multilateral agreement proposal that would abolish existing Digital Services Taxes (DST) and similar taxes by country upon the introduction of a digital tax and prohibit their future introduction. The Digital Services Tax is a system that applies international tax standards uniformly to multinational corporations in the information technology (IT) sector, introduced by some countries such as the United Kingdom and France. Since the introduction of a digital tax could lead to double taxation, it means that similar taxes such as the Digital Services Tax should be abolished.

The Pillar 2 report includes measures to support the implementation of the 'global minimum tax.' The global minimum tax is a system that sets a minimum corporate tax rate worldwide to prevent tax avoidance by multinational corporations. In the Pillar 2 report, the OECD announced an implementation plan consisting of three components to facilitate the smooth implementation of the global minimum tax, which entered the implementation phase after the final agreement earlier this year: ▲ safe harbor guidance ▲ standard reporting forms ▲ tax certainty procedures.

Specifically, the safe harbor guidance is a measure that exempts the obligation to calculate in a simplified manner only for countries or companies expected to have a high effective tax rate. This is to alleviate the burden on countries and companies caused by the complex calculation of effective tax rates by country. The standard reporting forms are forms used worldwide, prepared for reporting various information necessary for calculating effective tax rates. The reporting forms consist of items such as general corporate accounting information, explanations of corporate structure, effective tax rate, and additional tax calculations.

The tax certainty procedures are procedures to resolve disputes related to Pillar 2. This is because various disputes such as double taxation may arise if interpretations and applications differ between countries during the operation of Pillar 2. Accordingly, the Pillar 2 report includes measures to prevent and resolve disputes by encouraging prior agreements between tax authorities using existing advance pricing agreements and activating information exchange through multilateral tax administrative cooperation agreements.

The OECD plans to finalize the proposals after conducting written public hearings on Pillar 1 and 2 for industry and experts. The public hearing period for Pillar 1 is from the 20th of last month to the 20th of next month. The public hearing period for Pillar 2 is from the 20th of last month to February 3rd of next year. A Ministry of Economy and Finance official said, "Once this public hearing for Pillar 1 is over, the collection of stakeholder opinions on all major agendas will be completed," adding, "We plan to complete negotiations on the multilateral agreement by the first half of next year by reflecting the opinions of industry and experts raised during the public hearings."

This content was produced with the assistance of AI translation services.