Comparing Tax Revenues to Be Raised by Developing Countries from the Amount A and the UN Model Treaty Article 12B Regimes

In this research paper, we attempt to estimate the tax revenues to be gained (or lost) by the South Centre and African Union’s Member States under the Amount A and Article 12B regimes. Our analysis relied on sources of information available to private sector researchers but did not involve review of any information that taxpayers provide to tax authorities. Our research demonstrates that the comparative revenue effects of the Amount A and Article 12B taxation regimes largely depend on (a) design details of the Article 12B regime, (b) whether the country hosts headquarters of MNEs that may be in scope of Amount A or Article 12B taxation, and (c) what relief from double taxation, if any, the country will grant to domestic taxpayers subject to taxation under either the Amount A or Article 12B regimes.

This study was commissioned by the South Centre, an intergovernmental organization of developing countries comprising 54 members, and the Coalition for Dialogue on Africa (CoDA). The South Centre and CoDA’s objective for this study is to help Member States of the South Centre and the African Union (“Member States”) make informed decisions on whether to accede to the Two Pillar Solution developed by the Inclusive Framework on Base Erosion and Profit Shifting (“IF”) or to pursue alternative policy measures such as taxation of income from automated digital services under the framework of Article 12B of the United Nations Model Double Taxation Convention (“UN Model Treaty”). To inform the decision-making process by the Member States, the South Centre and CoDA have disseminated a call for papers with one paper being a study that compares estimated revenue gains or losses from the Amount A and Article 12B regimes (on both gross and net basis) for the Member States. This paper describes such a study, which was undertaken by its authors during February and March 2022.

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