Pillar of Salt? OECD Unveils a Proposed Unified Approach to Profit Allocation

    View Author October 2019

    On October 9, 2019, the OECD Secretariat published a proposal for a "Unified Approach" under Pillar One of its Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy. Although it may be important in helping to move the Programme of Work forward, the proposed Unified Approach does not represent a consensus view of the Inclusive Framework.

    The OECD hopes that the proposals will help expedite international negotiations by providing what is still a very high-level set of general parameters for such negotiations. Therefore, although enormously ambitious, the proposed Unified Approach is little more than a “stepping-stone” towards finding a political agreement during 2020 on changing the existing international tax rules regarding profit allocation and nexus.

    The OECD recognizes that the Secretariat’s proposed Unified Approach is merely an unfinished blueprint, but hopes it forms the basis for something capable of multilateral acceptance and practical implementation. Nonetheless, it has also re-emphazised that political ambition, engagement, pragmatism and endorsement is critical to reaching a consensus-based solution.

    This alert summarizes the new proposal and comments on a number of issues that such an approach raises.