Submission to the consultation under Workstream II on the proposed Protocol on Taxation of Income from Cross-Border Services

The present submission was made to the Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Cooperation per their request of input on WORKSTREAM II: DRAFT PROTOCOL ON THE TAXATION OF INCOME FROM CROSS-BORDER SERVICES.

We propose a practical approach that willing countries could implement quickly. The primary method we suggest would combine taxation based on net income by the country where services are delivered with ease of administration through a tax on gross payments.

The tax would be at a rate calculated by multiplying the operating profit margin of the MNE corporate group to which the recipient of the income belongs and the standard rate on profits in the country applying it. This would reflect the actual profitability of the enterprise concerned, taking into account its worldwide expenses and revenues. Profitability rates for services vary widely, and this method should produce a range from 1.25% to 17.5%.

Applying it to payments is the only way to ensure ease of administration. This would enable its immediate adoption by willing states whether acting singly or jointly, based on model rules and procedures for coordination. Alignment with existing incompatible tax treaties could be facilitated through a multilateral instrument.

This method should be coupled with an option for the enterprise concerned to accept a comprehensive methodology enabling taxation, at least once and only once, of its worldwide net income, adjusted for tax purposes, with tax rights apportioned among states based on agreed factors reflecting the location of its real activities (employees, physical assets and sales). This methodology could be based on the rules developed for the proposed multilateral convention for Amount A in Pillar 1 of the BEPS project, although they could be simplified.

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UN Framework Convention, Digital EconomyBEPS Monitoring Grouptaxation of services, tax treatiesComment
Submission on 'Revision of Chapter VII of the Transfer Pricing Guidelines on Special Considerations for Intra-Group Services'

The BEPS Monitoring Group has produced comments to the OECD’s public consultation on the “Revision of Chapter VII of the Transfer Pricing Guidelines on Special Considerations for Intra-Group Services”.

In this submission, we reiterate what we had already highlighted in previous submissions on the fundamental inconsistency of attempting to apportion costs while continuing to attribute profits through transactional methods—a disparity that risks enabling further base erosion and profit shifting. We also emphasize that the continued reliance on "accurate delineation" through functional analysis remains inherently subjective and fact-intensive, placing overwhelming burdens on resource-constrained tax authorities while generating increased disputes. On more specific comments, our submission points out, among others, to specific concerns with the proposed revisions, including unnecessary additions like the "expected benefit" concept that could invite abuse, insufficient safeguards against duplicative services, and the problematic retention of the 5% markup for low value-added services—which we have long argued should be eliminated entirely.

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BEPS Monitoring GroupComment
Comments on the Side-by-Side Package to the Global Anti-Base Erosion Model Rules

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These comments by the BEPS Monitoring Group (BMG) analyse the Package released by the OECD Secretariat on 5th January 2026 agreed by the G20/OECD Inclusive Framework on BEPS. This package provides a further set of ‘administrative guidance’ for the implementation of the Model Rules of the global anti-base erosion (GloBE) tax that aims to ensure a global minimum tax on multinational enterprises (MNEs). Its main component is a ‘Side-by-Side System’, designed to provide compatibility with the GloBE for the US tax rules on MNEs. Despite this focus on the US, it has been formulated as standards with which the rules of any country, including the US, must comply to ensure such compatibility.

We aim here to provide an analysis and critique of the global minimum tax as well as the effects of this package.

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minimum taxBEPS Monitoring Groupglobal minimum taxComment
Contribution to the to UN INC on the Protocol on Dispute Prevention and Resolution

The BMG has produced comments to the public consultation on the Issue Note of Workstream III negotiating the protocol on dispute prevention and resolution.

The increasing complexity of cross-border transactions has led to a surge in international tax disputes, arising in multiple forums—including mutual agreement procedures (MAPs), investor-state dispute settlement (ISDS), and WTO adjudication. While MAPs under tax treaties aim to resolve double taxation conflicts, they have proven ineffective, particularly for developing countries. Binding arbitration, introduced under the OECD’s Multilateral Instrument (MLI), remains unpopular among developing nations due to sovereignty concerns, with few cases actually proceeding to arbitration. Meanwhile, ISDS claims—constituting 15% of known cases (2000–2021)—pose significant risks, as seen in high-value awards like “Yukos v. Russia” ($50 billion). 

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Unitary Taxation, Digital EconomyBEPS Monitoring Groupdispute resolution, double tax treaties, dispute preventionComment
Contribution to the to UN INC on the Protocol on Taxation of Cross Border Services

The BMG has produced comments to the public consultation on the Issue Note of Workstream II negotiating the protocol addressing the tax challenges of the digitalization of the economy.

The taxation of cross-border services highlights critical gaps in current international tax rules. Services, increasingly central to economic growth, often involve minimal physical presence in market jurisdictions, undermining source-based taxation and favoring non-resident providers. This imbalance discourages local service sector development while enabling multinational enterprises (MNEs) to exploit "double non-taxation" through low-tax affiliates. A new paradigm is needed—one that fairly allocates taxing rights based on real economic activity rather than outdated physical presence tests. 

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Digital Economy, Unitary TaxationBEPS Monitoring GroupUN framework convention, taxation of servicesComment
THE SUBJECT TO TAX RULE: A COMPARISON OF THE OECD AND UN VERSIONS

This short Briefing analyses and compares the two proposals for modifying tax treaties by inclusion of a Subject to Tax Rule (STTR), one developed by the United Nations Committee of Tax Experts (UNTC), and the other through the OECD/G20 Inclusive Framework on BEPS, as part of the Two Pillar proposals.

We provide an overview, comparison and evaluation of the two proposals, to contribute to better public understanding of this important but technically complex matter.

The Briefing is based on a longer article, available here

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BEPS Monitoring GroupComment
The BEPS Proposals and Alternatives

Here we provide a Briefing, which analyses the outcomes of the latest phase of the G20/OECD project on base erosion and profit shifting (BEPS), and outlines options and alternatives, especially for developing countries.

We show the limitations of the BEPS project measures, and their unsuitability for developing countries. Such countries should take action to adopt measures in response, especially to the global minimum tax (the GloBE), implementation of which is under way. The GloBE itself is unfair and ineffective for most developing countries, but its implementation could put a brake on the race to cut corporate tax rates. It provides an opportunity for developing countries to (i) review and phase out inappropriate tax incentives, and (ii) introduce stronger measures to protect the source tax base, which can be designed to be compatible with the GloBE.

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BEPS Monitoring Group Comment
Pillar One Amount B

We have submitted our comments to the public consultation on the discussion draft on a simplified method of allocating rights to tax MNE profits referred to as Amount B.

We strongly support the need for simplicity and certainty in allocating the rights to tax MNE profits, but this can only be achieved through formulaic methods. We analyse the proposal and explain why in our view, the approach now suggested would be both ineffective and inappropriate. An MNE’s profits from sales result from a range of activities which can only fictitiously be attributed to different entities. In practice wholesale distributors will have valuable information and data on local markets and customers. Limiting Amount B to supposedly ‘baseline’ stripped-risk functions will result in a systemic under-allocation of profit to sales jurisdictions.

Simplification should be done in line with the general approach in Pillar 1, of a formulaic allocation from the total global profits of the MNE, and the present proposal should be revised to present a formulaic method based on group-wide profitability.

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BEPS Monitoring GroupComment