This lesson examines the fundamental purpose and mechanics of Pillar One, which aims to reallocate taxing rights to market jurisdictions where multinational enterprises have customers and users, even in the absence of a physical presence.

• The Problem Pillar One Addresses: Historically, taxing rights on corporate income have been allocated among jurisdictions based on where a company has a physical presence. This arrangement has not always led to appropriate outcomes in the case of digital business models. Amount A under Pillar One aims to rectify this situation by reallocating some taxing rights on corporate income to market jurisdictions.

• Amount A – The Core Mechanism: Amount A reallocates a defined portion of residual profits of the largest and most profitable multinational enterprises to market jurisdictions. Under this mechanism, multinational enterprises (including digital companies such as search engine operators) will also pay tax where their users are located, regardless of physical presence.

• The Multilateral Convention (MLC): Amount A will be implemented on the basis of a multilateral convention being drawn up at the OECD level. Participating countries are to refrain from adopting unilateral digital taxes (or similar measures) or must rescind existing national digital taxes to avoid a patchwork of different national measures.

• Implementation Status (As of Early 2026): Consensus on Pillar One had not been fully reached by early 2025, and the U.S. government issued a memorandum stating that the “OECD Global Tax Deal has no force or effect in the United States,” adding significant uncertainty to the future of the agreement. Negotiations continued into 2025 on outstanding Amount B issues, with the MLC not yet having been opened for signature.