Secretariat Proposal for a “Unified Approach” under Pillar One



Secretariat | Organisation for Economic Co-operation and Development (OECD)


The Programme of Work (PoW) adopted by the Inclusive Framework on BEPS at its meeting of 28-29 May 2019, and approved by the G20 Finance Ministers and Leaders at their respective meetings in Japan in June 2019, provides for two pillars to be developed, on a without prejudice basis, with a consensus solution to be agreed by the end of 2020. For Pillar One, the PoW allocates work to explore the three proposals articulated so far, but recognises that for a solution to be delivered in 2020, the outlines of a unified approach would need to be agreed by January 2020. This outline will have to reduce the number of options available and bridge the remaining gaps to facilitate the task of arriving at a consensus on a unified approach to Pillar One in 2020. Consistent with that objective and to help expedite progress towards reaching a consensus solution to Pillar One issues, the Secretariat prepared a proposed “Unified Approach”. It is built on the significant commonalities identified in the PoW, takes account of the views expressed during the March Public Consultation in Paris, and seeks to consider the different positions of the members of the Inclusive Framework. This proposal was discussed by the Task Force on the Digital Economy (TFDE) at its meeting on 1 October 2019 and is now released to the public for comments.

Public Consultation

The public consultation meeting on the proposed “Unified Approach” to deal with Pillar One issues will be held on 21 and 22 November 2019 at the OECD Conference Centre in Paris, France. The objective is to provide external stakeholders an opportunity to provide input into the ongoing work. Another separate public consultation meeting on Pillar Two issues will be organised in December 2019, and the related public consultation document is expected to be released in early November 2019. This consultation document describes, at a high-level, the “Unified Approach” to Pillar One proposed by the Secretariat, and seeks comments from the public on a number of policy issues and technical aspects. The comments provided will assist members of the Inclusive Framework in the development of a solution for its final report to the G20 in 2020.

Interested parties are invited to send their comments no later than Tuesday, 12 November 2019, noon Paris time, by email to in Word format (in order to facilitate their distribution to government officials). They should be addressed to the Tax Policy and Statistics Division, Centre for Tax Policy and Administration. Please note that all comments on this public consultation document will be made publicly available. Comments submitted in the name of a collective “grouping” or “coalition”, or by any person submitting comments on behalf of another person or group of persons, should identify all enterprises or individuals who are members of that collective group, or the person(s) on whose behalf the commentator(s) are acting. Speakers and other participants at the upcoming public consultation meeting in Paris will be selected from among those providing timely written comments on this consultation document. Information on the public consultation meeting is available on the OECD website. The proposals included in this consultation document have been prepared by the Secretariat, and do not represent the consensus views of the Inclusive Framework, the Committee on Fiscal Affairs (CFA) or their subsidiary bodies. 

  1. The tax challenges of the digitalisation of the economy were identified as one of the main areas of focus of the Base Erosion and Profit Shifting (BEPS) Action Plan, leading to the 2015 BEPS Action 1 Report. Policy discussion on those challenges remains an important part of the international agenda.
  2. Following a mandate by G20 Finance Ministers in March 2017, the Inclusive Framework, working through its Task Force on the Digital Economy (TFDE) delivered an Interim Report in March 2018: Tax Challenges Arising from Digitalisation – Interim Report 2018 (the Interim Report).
  3. Conscious of the ambitious G20 time frame and the significance of the issue, the TFDE further intensified its work following the delivery of the Interim Report. Drawing on the analysis included in the Action 1 Report as well as the Interim Report, and informed by the discussions at the July 2018 and December 2018 meetings of the TFDE on a “without prejudice” basis, a number of proposals were made by delegates to the TFDE. These proposals, together with the recent discussions and comments from members of the OECD/G20 Inclusive Framework, lay the grounds for the Inclusive Framework to agree on the way forward to achieving a consensus-based solution in 2020.
  4. In January 2019, the Inclusive Framework issued a short Policy Note, which grouped the proposals under consideration into two pillars. Pillar One, with which this document is concerned, focuses on the allocation of taxing rights and seeks to undertake a coherent and concurrent review of the profit allocation and nexus rules. Pillar One comprises the “user participation”, “marketing intangibles”, and “significant economic presence” proposals. The Policy Note stated that these proposals would entail solutions that go beyond the arm’s length principle. Pillar Two is concerned with the remaining BEPS issues.
  5. As part of the continuing work, a public consultation document was released on 13 February 2019, which sought input from external stakeholders.
  6. On 28 May 2019, the Inclusive Framework adopted a Programme of Work to develop a consensus solution to the tax challenges raised by the digitalisation of the economy. This was subsequently endorsed by G20 Finance Ministers at their meeting in Fukuoka on 8-9 June 2019, and by G20 Leaders in Osaka on 28-29 June 2019. The Programme of Work is a critical step towards responding to the request from the G20 to find and agree a consensus solution by the end of 2020.
  7. The Programme of Work highlighted the commonalities of the three proposals presented to the TFDE to facilitate a consensus solution on Pillar One. It also identified various technical issues that need to be addressed and allocated this work to different working parties. However, the Programme of Work emphasised the necessity to agree on the outline of the architecture of a unified approach by January 2020, given the goal of arriving at a consensus solution by the end of 2020. It also acknowledged that without bridging the gaps between the three proposals, it will not be possible to deliver such a solution, which may in turn encourage more jurisdictions to adopt uncoordinated unilateral tax measures, including measures that tax gross revenues. Any such occurrence would undermine the relevance and sustainability of the international tax framework, and would damage global investment and growth.
  8. As highlighted in the Programme of Work, the stakes are very high. In the balance are: the allocation of taxing rights between jurisdictions; fundamental features of the international tax system, such as the traditional notions of permanent establishment and the applicability of the arm’s length principle; the future of multilateral tax co-operation; the prevention of aggressive unilateral measures; and the intense political pressure to tax highly digitalised MNEs.
  9. In recent months, in light of the high stakes and the need for a clear direction, the Secretariat has undertaken extensive consultations to develop a “Unified Approach” which is outlined in this document. This document also aims to illustrate its application through an example.

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