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Amount A concerns are raised by Microsoft and Unilever.

Microsoft and Unilever, two multinational corporations, have contended that Amount A under Pillar One should be constructed to prevent taxpayers from being subjected to double taxation by way of withholding taxes and other levies.

Microsoft and Unilever are just two of the numerous companies that have responded to the OECD's call for public feedback on pillar one. These comments, which were released on August 25 and were written in July and August in anticipation of the meeting on the reform proposal scheduled for September 12.

"Amount A should be reduced or eliminated to the extent jurisdictions are already taxing residual profits via transfer pricing, withholding taxes, or other taxes," wrote Thomas Roesser, Microsoft's tax policy counsel.

"The rules should not incentivise countries to impose new withholding taxes or make aggressive transfer pricing adjustments where Amount A already provides an internationally agreed allocation of residual profits," he continued.

Withholding taxes must be taken into account when applying Amount A, according to Janine Juggins, global head of tax and treasury at Unilever.

The amount of tax paid (under Amount A) to the relevant jurisdiction may change as a result of withholding tax.

Juggins stated, "this is, in effect, already a source taxation in the market jurisdiction to which Amount A may be allocated. In other words: double taxation and double counting may easily arise."

A three-tier profit allocation method, Amounts A, B, and C, would be imposed by Pillar 1; each would have an impact on how profits are split between jurisdictions.

Amount A was first described by the OECD as a portion of presumed residual profits that would be allotted to the relevant market jurisdiction. Instead of using the arm's-length principle, this would necessitate a formulaic approach, i.e. new taxing rights, to profits.

This would, in essence, represent a fundamental departure from conventional transfer pricing. Winners and losers from such a significant shift in global tax policy are inevitable.

Many governments in developing nations worry about losing their ability to tax a certain amount of revenue, and corporations are still concerned about the possibility of unilateral action. Because of this, the reform discussion has not yet been resolved.


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