BEPS 2.0 Dispute Resolution - The Need for Effective Dispute Prevention/Resolution in a Global Taxation Framework

The OECD/G20 “BEPS Inclusive Framework” discussion on international tax challenges arising from the digitalization of the economy resulted in an agreement on a two-pillar solution: Pillar 1 (allocation of new taxing rights to market countries) and Pillar 2 (global minimum taxation). Pillar 2 has been legislated in many countries, and in Japan, the corporate income tax system for global minimum taxation will be applied to fiscal years beginning on or after April 1, 2024. However, it appears that the framework for dispute resolution corresponding to the new international taxation has not yet been sufficiently developed. In other words, Pillar 1: Multilateral Convention on Amount A provides an innovative multilateral dispute prevention/resolution mechanism, but the prospects for its entry into force are uncertain, and no new dispute prevention/resolution measures for Amount B are envisaged, while Pillar 2: Global Minimum Taxation seems to not yet have been sufficiently developed in the event of disagreement on interpretation and application. It is expected that discussion on this point of view will progress before its implementation, considering the current efforts to improve mutual agreement procedure and the ICAP mechanism.