Resumen de Lead Tax Administration: A deal breaker?
Adrianto Dwi Nugroho, Muhammad Atthuur Brotoatmodjo, Arvie Johan, Nabila Asysyifa Nur, Muhammad Hawin
This article examines the introduction of the lead tax administration (LTA) in the administrative and certainty framework of Pillar One. The LTA is designed to be assumed by the tax authority of the jurisdiction in which ultimate parent entity (UPE) of a multinational enterprise (MNE) resides. In calculating Amount A of Pillar One, it is required to apply a certain methodology and distribute tax bases to all jurisdictions in which the enterprise generates business profits. Market jurisdictions may perform consultative functions once the LTA is calculated. The main finding of this article is that the appointment of the LTA has violated market jurisdictions’ tax sovereignty to the extent that tax assessments taxable income of their residents, if they qualify as ‘highly profitable MNEs’, will be performed by the LTA. The authors argue that the new taxing right established through the implementation of the Pillar One objective is only meant to grant market jurisdictions with additional tax receipts instead of granting them with full taxing rights. Unfortunately, sound legal and tax principles have not yet been formulated to justify the existence of the LTA.
