According to Jonathan Fraser, adviser at the OECD Centre for Tax Policy and Administration, the OECD remains optimistic that by mid-2023, countries will be able to finalize transfer pricing simplification rules that are part of a two-pillar global tax reform plan. He made these remarks during a 29 March webcast organized by KPMG and the U.S. Council for International Business.
Fraser stated, “We're confident we'll get an agreement and are definitely still aiming for the middle of the year, but . . . there are a few unresolved questions which delegates are considering on the design of amount B,”.
Fraser pointed to stakeholder responses to the OECD’s recent public consultation on draft amount B rules, which overwhelmingly called for broadening their scope. Businesses want the scope to be as wide as possible because if it’s too narrow, no taxpayer would be able to use the simplification approach, he said.
“But on the flip side, there are natural limits to how broad that scope can be as well, and delegates are working very, very hard and having many, many meetings to find . . . that right balance — making it sufficiently broad enough that it's meaningful,” Fraser added.
Amount B is part of pillar 1 of the OECD-brokered two-pillar international corporate tax overhaul plan. The goal of the amount B rules is to provide a consistent approach for identifying in-scope baseline marketing and distribution transactions and establishing a pricing methodology for those transactions. Once finalized, the amount B framework would curb transfer pricing disputes over issues like an in-scope taxpayer’s choice of transfer pricing method, net profit indicators, and remuneration.
Many taxpayers and governments, including the United States, see amount B as a win because it would save resources spent on resolving returns earned by distributors, such as through mutual agreement procedure cases.