The Organization for Economic Co-operation and Development (OECD) defines the international tax and transfer pricing rules and regulations that are adopted by its member countries globally. The OECD refines its approach, guidance and rules to address emerging concerns, as the global economy and business practices evolve. In making changes to these key global tax rules (such as the proposed BEPS 2.0 reforms), the OECD adopts an inclusive approach involving input from all member states and inviting feedback and suggestions from stakeholders globally as part of its public consultation process.
As part of the OECD’s two-pillar solution to address the tax challenges arising from the digitalization of the economy, on October 14, 2020, the OECD released the report “Tax Challenges Arising from Digitalisation – Report on Pillar One Blueprint”. A key element of this proposed tax reform is Pillar One – Amount B, which is intended to streamline the process for pricing baseline marketing and distribution activities in accordance with the arm’s length principle (ALP). The OECD released a Public Consultation Document on Pillar One – Amount B in late 2022, and its updated ‘Economic Impact Assessment of the Two-Pillar Solution’ in early 2023.
Both the OECD Public Consultation Document on Pillar One – Amount B and the Economic Impact Assessment highlight the role of the Orbis database in the OECD’s tax and transfer pricing work.
Pillar One – Amount B is designed to simplify and streamline the application of the ALP in relation to in-country baseline marketing and distribution activities. The OECD chose to use Orbis as the foundation to help establish arm’s length returns for in-country baseline marketing and distribution activities on a global basis, based on its breadth and depth of public and private companies1.
With regard to the Economic Impact Assessment of the two-pillar solution, the OECD continued analysing and assessing the economic impact of the two pillar solution to address the tax challenges from the digitalization of the economy. It used Orbis data, in combination with Country-by-Country Reporting (CbCR) data and other sources, as the basis for its estimations on the projected revenues that states could gain/lose by implementing the two-pillar solution.
Image 1: Slide 12 of the Economic Impact Assessment of the Two-Pillar Solution webinar presentation showing sources the OECD relied upon for this analysis
Establishing arm’s length returns for marketing and distribution activities on a global basis is challenging under any circumstances. Based on these two reports, it’s clear that the OECD used Orbis data to validate the credibility, reliability and authenticity of these returns. This further highlights the benefits of using the Orbis database as the basis for undertaking transfer pricing benchmarking globally. We are proud of this acknowledgement and continue to develop the database as the main source of information across industries.
For more information on the methodological overview and key results on both Pillars, please download the full OECD Public Consultation Document on Pillar One and the Economic Impact Assessment of the Two-Pillar Solution webinar presentation.