Leonardo Ávila for The Observer
A few weeks ago ICS participated in the II International Tax Congress of the IFA (International Fiscal Association) held in Panama City, Panama.
The Congress brought together important international advisors with the outstanding participation of Pascal Saint-Amans, who from the OECD led key initiatives such as the BEPS (Base Erosion and Profit Shifting) project and the global tax reform.
Among the issues that dominated the agenda were, as expected, the persistent challenges in implementing the two pillars of the BEPS initiative.
These are: Pillar 1, aimed at redefining the rules of taxation in the digital economy, and Pillar 2, perhaps the best known. It introduces a global corporate minimum tax of 15% for large multinational groups.
Pillar 1: challenges
One of the main objectives of Pillar 1 is to update the concept of permanent establishment so that companies are taxed not only where they have offices, employees or infrastructure. But also where they actually generate their income.
Consider a streaming platform that has no physical presence in Costa Rica, but gains thousands of local subscribers.
The model intends that part of these profits are also taxed in the market country. It is a logical shift in the face of digitalization, but technically very complex.
And that is precisely its biggest barrier. To date, Pillar 1 has not been implemented and its viability is seriously questioned, even within the OECD itself.
The level of technical sophistication required, coupled with the high administrative costs of deployment, far outweighs the expected revenue benefits for many jurisdictions, especially small and medium-sized economies.
Pillar 2 with political obstacles
Pillar 2, on the other hand, has made much more tangible progress. However, it faces a significant political hurdle: its implementation in the world's largest market, the United States, remains on hold.
In Europe, the European Union approved its incorporation by means of a directive and several member states (Germany, France, Italy, Denmark, among others) have already incorporated it into their domestic legislation.
Even so, the process is not free of frictions: differences in deadlines, regulatory asymmetries and technical inconsistencies are generating a fragmented operational scenario.
Progress in Costa Rica?
In the case of Costa Rica, progress has been practically nil. The country has adopted measures for the automatic exchange of information for digital platforms (MH-DGT-RES-0025-2024 “Resolution on Automatic Exchange of Information regarding sellers that perform relevant activities through Digital Platforms”).
However, with respect to Pillar 2, the Ministry of Finance has been very cautious, mainly because of the impact it may have on such a flagship regime as the Free Trade Zone Regime.
The fact that we are in the midst of an election campaign (although it seems that the Government has never ceased to be so) does not help the discussion of these issues in such an important international context.
The outlook going forward is uncertain.
A new draft of Protocol 1 of the UN Framework Convention on International Tax Cooperation, which is still under negotiation, is expected in 2026.
This is emerging as a possible alternative to Pillar 1, with a design that would revise the rules for taxation of cross-border services.
In the meantime, we must continue “testing” and hope that the international community will finally reach a consensus that will shape the future of global taxation... and, of course, its impact on local economies.