This chapter examines the reasons for, and policy behind, the programme of work that has developed a new international tax framework. In developing two "pillars", the OECD Secretariat and, more latterly, the Inclusive Framework, with the proposals in Pillar One, have broken new ground in proposing new taxing rights without the requirement of physical presence in the source or market jurisdiction. These profit allocation rules radically depart from the existing international tax framework. In addition there are other proposals that use formulaic calculations, residual profit split methodology and elements of formulary apportionment, allocating profits to the marketplace jurisdiction, ignoring the single entity concept, and departing from the arm's-length principle. In respect of Pillar Two, the proposalto prevent profit shifting is equally controversial. The proposals under Pillar Two contemplate a minimum level of tax paid on all internationally operating businesses. These proposals confront the international tax framework norm in the areas of transfer pricing, the use of intellectual property, residence taxation and, in particular, tax competition.

This chapter analyses the two pillars of the Unified Approach and the Global Anti-Base Erosion Proposals in the light of alternative policy choices which were available to the OECD. These major alternative policy choices include destination-based cash-flow taxation, residual profit allocation by income, formulary apportionment and expanding the concept of permanent establishment. In each case these policies are explained and the advantages and disadvantages of the major policy discussed. Each policy is then analysed to see what it has contributed to the 2020s compromise and what further contribution it might make to international tax reform in the future.What emerges from this analysis is that key elements of the reform owe much to the destination basis of taxation present in the various alternative reform options and selectively adopted in particular by the Unified Approach in Pillar One.

This chapter examines the reasons for, and policy behind, the programme of work that has developed a new international tax framework. In developing two "pillars", the OECD Secretariat and, more latterly, the Inclusive Framework, with the proposals in Pillar One, have broken new ground in proposing new taxing rights without the requirement of physical presence in the source or market jurisdiction. These profit allocation rules radically depart from the existing international tax framework. In addition there are other proposals that use formulaic calculations, residual profit split methodology and elements of formulary apportionment, allocating profits to the marketplace jurisdiction, ignoring the single entity concept, and departing from the arm's-length principle. In respect of Pillar Two, the proposalto prevent profit shifting is equally controversial. The proposals under Pillar Two contemplate a minimum level of tax paid on all internationally operating businesses. These proposals confront the international tax framework norm in the areas of transfer pricing, the use of intellectual property, residence taxation and, in particular, tax competition.

This chapter analyses the two pillars of the Unified Approach and the Global Anti-Base Erosion Proposals in the light of alternative policy choices which were available to the OECD. These major alternative policy choices include destination-based cash-flow taxation, residual profit allocation by income, formulary apportionment and expanding the concept of permanent establishment. In each case these policies are explained and the advantages and disadvantages of the major policy discussed. Each policy is then analysed to see what it has contributed to the 2020s compromise and what further contribution it might make to international tax reform in the future.What emerges from this analysis is that key elements of the reform owe much to the destination basis of taxation present in the various alternative reform options and selectively adopted in particular by the Unified Approach in Pillar One.