Key points: 

  1. Prior to an agreement on the new Global Anti-Base Erosion Proposal, a thorough impact assessment should look at the effects of the anti-base erosion measures of the original BEPS-Project. Further, the measures under Pillar One should also be assessed, specifically to what extent they already counter risks of base erosion in connection with the digitalization of the economy.
  2. GloBE rules should be considered a “maximum standard” that Inclusive Framework members (IF) commit not to go beyond. Jurisdictions should not be allowed to apply lower minimum tax rates or stricter requirements. Otherwise, the objective of avoiding uncoordinated unilateral measures could not be achieved. IF members should also commit to abolish or at least adapt existing CFC rules as well as unilateral deductibility limitations upon implementation of GloBE and the IF should agree on a white list of approved foreign minimum tax regimes for purposes of Pillar Two.
  3. GloBE should focus exclusively on the prevention of artificial arrangements which do not reflect economic reality. This is particularly relevant regarding compatibility with EU law which allows unequal treatment of cross-border cases and thus a restriction of the four freedoms only if it is justified by overriding reasons of public interest such as the prevention of abuse.
  4. Substance-based IP regimes which are fully compliant e.g. with the BEPS Action 5 Nexus approach should be carved out. Pillar Two measures need to balance countries’ concerns regarding artificial arrangements with countries’ rights to implement generally accepted tax regimes for R&D.
  5. We suggest that instead of focusing exclusively on low effective tax rates, Pillar Two measures should also take into account state subsidies that generate comparable effects. Otherwise, governments may easily circumvent the new rules by replacing low tax regimes with equivalent subsidies.
  6. Global accounting standards (IFRS and US GAAP) can serve as a starting point. The objective of these standards is to provide relevant information to investors, which may conflict with basic requirements of corporate taxation.Further analysis must be carried out on whether the accounting standards and the proposed mechanisms to address timing differences are a sound basis for GloBE.
  7. In addition to global accounting standards, local GAAP accepted by stock exchanges such as Swiss GAAP FER must also be acknowledged as generally accepted accounting standards. For many Swiss companies IFRS is not suitable due to significant deviations relative to the Swiss Code of Obligations and the Swiss Tax Law. MNEs should be free to opt for any standard as long as it is a recognised financial accounting standard.
  8. We recommend a worldwide blending approach, which would meet the policy objectives of Pillar Two in a proportionate and focused way. Mandating a jurisdictional or entity blending approach would create significant complexity and cause high compliance costs for both taxpayers and tax authorities. A jurisdictional or entity blending approach would also undermine the practicability of working from parent-consolidated financial accounts.
  9. A clear and simple ordering of the four proposed rules of GloBE is essential to reduce compliance costs for tax authorities and MNEs. The income inclusion rule should function as the primary rule. The denial of deduction rule/undertaxed payments rule should only apply to payments to an affiliate whose ultimate parent is not subject to a Pillar Two income inclusion rule. We are concerned that the current consultation covers only the income inclusion rule but not the other three rules of the GloBE proposal and the interactions between them.

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