We here publish the comments we submitted on the draft model rules for tax base determinations released by the OECD Secretariat on 18 February 2022 for public consultation, in the continuing work to address the tax challenges of the digitalised economy by the Task Force on the Digital Economy (TFDE) set up by the G20/OECD Inclusive Framework on BEPS.

While technical in nature, these rules have potentially far-reaching policy implications. Although the scope of application of these new rules is currently very small, limited to the 100 largest and most profitable multinational enterprises, they provide building blocks for new rules that could finally ensure taxation of multinational corporate groups in accordance with the economic reality that they operate as unitary enterprises. The tax base determination rules would establish an agreed approach for adjusting the consolidated accounts that MNE corporate groups already produce for financial accounting to make them suitable for tax reporting purposes.

Hence, it is important that they should be designed to enable the eventual more comprehensive global adoption of this new approach, and that there should be adequate public debate of the design of these new rules. Since the intention is to ensure adoption of these rules by a large number of countries with little or no further opportunity for modification, it is particularly important that these public consultations should be conducted in a way that facilitates wide participation before the rules are finalised.