Amount A vs Article 12B: One Size May Not Fit All

26 July 2023
Dr. Vladimir Starkov and Alexis Jin

Implementation of Amount A of Pillar One currently lacks consensus for several reasons, including some governments’ dissatisfaction with the revenues projected under Amount A. In their article “Amount A vs Article 12B: One Size May Not Fit All,” published in IBFD International Tax Studies, NERA Managing Director Dr. Vladimir Starkov and Consultant Alexis Jin compare the tax revenues that may be raised by certain middle-income countries under Amount A and under an alternative multilateral tax regime based on the principles of Article 12B of the UN Model Convention.

The authors’ results indicate that, while some middle-income countries may be better off under the Amount A regime, others may prefer the alternative regime based on the Article 12B principles. The choice between these options depends on factors such as the domestic economic activities of multinational enterprises in the scope of Amount A, the level of domestic economic activities of companies engaged in automated digital services, the design of the taxation regime based on Article 12B, and the specifics of double tax relief policies by the countries that host either companies in the scope of Amount A or in the scope of Article 12B. The authors also offer thoughts on how the multinational regime based on Article 12B may coexist with Amount A under Pillar One.