We acknowledge the significant efforts and investment that member countries, industry and taxpayers have made in contributing to the current Pillar 1 framework. We welcome an approach that is both simple and effective for applying Pillar 1.
Banks have a taxable, physical presence in places where they operate regulated business. Therefore, they should be outside the scope of Pillar 1 . Moreover, metrics such as balance sheet or gross revenues do not consider the extremely high capital costs associated with running regulated banks compared with other industries (such as technology and consumer goods companies).
We believe that the application of a “worldwide” basis of taxation is a robust equivalent of the Income Inclusion Rule and offers opportunities for a simplified approach to achieve Pillar 2’s objectives. We are concerned, however, that the complexity – which will be generated in addressing entities with multiple branches – is considerable and risks generating counterintuitive results.