Cross-border Tax Talks

Beyond Pillar Two: Global tax policy update

Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Will Morris, PwC’s Global Tax Policy Leader, from PwC’s Global Transfer Pricing, Customs, and Indirect Tax Conference in Prague. Doug and Will discuss how trade policy now shapes tax outcomes, the G7 ‘side‑by‑side’ debate for Pillar Two, and why geopolitics complicates an Inclusive Framework deal. They explore the EU’s ‘simplification’ agenda (FTT/DEBRA/Unshell pullbacks), overlapping anti‑abuse regimes post-Pillar Two, and whether real simplification is politically feasible. The conversation turns to Digital Services Taxes amid Pillar One uncertainty, potential US responses (including Section 301 and talk of Section 899), and the rise of Significant Economic Presence rules. They close with the UN’s emerging convention, source‑based taxation of services, and the limits of AI and automation when dealing with unstructured taxpayer data. 

• 00:45 - Introduction: 7th inning stretch.  
• 02:20 - Beyond Pillar Two: Framing the trade - tax interplay. 
• 03:00 – The trade policy impact on the potential G7 agreement and the side-by-side proposition, 05:55 – Corporate Sustainability Due Diligence Directive burdens and other concerns raised in US-EU negotiations.  
• 10:30 - EU ‘Simplification Initiative’ overview; optimism vs. oxymoron.  
• 11:20 - Draghi report and Europe’s competitiveness challenge.  
• 12:55 - New EU work plan. 
• 13:20 - Financial transaction tax shelved.  
• 13:40 - DEBRA withdrawn. 
• 14:07 - Unshell proposal fades.  
• 15:20 - Dispute resolution vs. prevention trade‑offs.  
• 15:40 – Post-Pillar Two over
• laps with ATAD2/CFC/anti‑hybrids 
• 16:50 - Why repeals of legacy anti‑abuse rules are unlikely.  
• 18:40 - AI and pre‑filled returns: promise vs structural data gaps.  
• 21:00 – Digital Service Taxes status check as Pillar One stalls.  
• 21:25 – Countries (Canada, Poland, Belgium) DST plans and politics behind DSTs.  
• 25:10 - Section 899 ‘revenge tax’ 
• 26:20 - Possible use of Section 301. 
• 26:30 - Significant Economic Presence: concept and mechanics.  
• 28:05 - Kenya model 
• 28:50 - Possible scope beyond ‘digital’ 
• 30:00 - UN process: past ‘peak OECD,’ two‑bloc future, long timeline.  
• 31:20 - US exit; EU caution; adoption challenges.   
• 33:25 - Taxing services at source: Withholding vs. net approaches.  
• 34:45 - Alternative: Re‑source income and allocate by formula. 

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