There is no doubt that a significant amount of progress has been achieved, however it is questionable how sustainable a system would be if the U.S. is not ultimately able to enact the plan. If enacted, the impact of the plans for most UK businesses is likely to be a question of administration rather than absolute tax cost, and ensuring that structure, systems and processes are designed to streamline the compliance obligations will be an important consideration”.
In Australia, the principal issues for Australian businesses may arise in relation to the additional tax that could result from Pillar Two tax on active income CFCs of Australian resident companies and Pillar Two tax on foreign controlled companies that enjoy the R&D incentive or other tax concessions that reduce the Australian effective tax rate below 15%”.
Broadening the tax net through the “digital PE” concept—that is, a digital company that has a PE in a jurisdiction in spite of not having a physical presence within the jurisdiction-- is an attractive prospect to generate tax revenue in Africa. However, African revenue authorities’ application of existing PE legislation remains uncertain at best, without the “digital presence” that may further confuse matters. Moreover, the digital PE concept may require tax administrations to incur significant expenses with regards to administrative systems and highly skilled staff to monitor compliance. Most African countries do not currently have the capacity to do this. Driving effective taxation of value creation through the PE “nexus” is a noble idea, and may be the answer in the future, but resource limitations and financial constraints in developing countries are ever-present”.
In the U.S., the prospects for enactment are challenging, as much as the Biden administration is in favor of the plan. The U.S. would likely need 60 out of 100 votes in the Senate to pass Pillar Two reforms as a part of an overall tax package, and 67 out of 100 to amend treaties to “enact” Pillar One.”