Use Right Tools and Collaboration to Manage BEPS 2.0.

• Author: Eagan, Jamie
• Position: Base erosion and profit shifting

On July 1, 2021, we witnessed history as more than 130 countries approved a framework to reform international tax rules. It was agreed that the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) would take a two-pillar approach, with adoption planned for 2023.

Pillar One aligns taxing rights more closely with local market engagement and is intended to address the challenges posed by electronic commerce and digitization. This is a departure from the standard international tax rules of the last century, which have often required businesses to have a physical presence in a country before that country has a right to tax.

Pillar Two establishes a global minimum taxation framework through a series of interconnected rules. It is an unprecedented agreement on a global minimum level of taxation that stipulates a floor for tax competition among jurisdictions.

Numerous challenges face tax professionals as the emerging BEPS framework becomes clearer and they prepare for adoption. Among these challenges are:

* Inconsistent rules. Model rules were released in December 2021; however, the market still lacks the detail to apply them effectively. It is critical for tax leaders to understand how and when they will need to update their organization's systems to produce the data needed to comply with the final rules. Legislative differences across various countries will make it difficult to track when laws come into effect in relevant jurisdictions.

* Capturing the right data. Another key challenge is capturing the data at the correct level of granularity to enable and, where applicable, automate the calculations.

* Increasing disclosures. Adding BEPS 2.0 to the existing array of global or regional frameworks is sure to challenge tax professionals. Current reporting obligations include the Global Reporting Initiative's global tax reporting standard (GRI 207) as well as the public country-by-country reporting rules of the Organisation for Economic Co-operation and Development and the European Union. Tax leaders must have a thorough understanding of each relevant framework and how to reconcile their organization's disclosures under each.

* Building stakeholder understanding. Senior business leaders are, quite rightly, very concerned about the impact of BEPS 2.0 on their businesses, due not just to the tax impact but also to the process and reporting/compliance changes. Tax professionals must understand new requirements and any predicted...